Shopify (SHOP 4.59%) has grown into a $40 billion business by providing small businesses with the tools and resources traditionally available only to larger companies. By innovating on behalf of these entrepreneurs and start-up merchants, Shopify levels the playing field, ensuring that all business owners, from multibillion-dollar enterprises to humble mom-and-pop shops, have access to the same website-building tools, payment plans, capital, and shipping options.

This formula has certainly been a recipe for success, as shares have appreciated an incredible 160.4% year-to-date. And if this latest quarter is any indication, Shopify may yet have more growth ahead. In Q2, revenue rose to $362 million, a 48% increase year over year, and gross merchandise volume (GMV), the total amount of goods sold by merchants on the Shopify platform, grew to $13.8 billion, a 51% increase over last year's second quarter. 

A window with the Shopify logo prominently displayed next to a potted plant.

The Shopify Plus platform is resonating with some of the largest corporations in the world. Image source: Shopify Inc.

But while most of the focus seems to be on Shopify's efforts to empower small merchants, Shopify's platform for larger merchants, Shopify Plus, has quietly become the company's fastest-growing subscription plan. For investors, Shopify Plus adds a lot of attractive qualities to the company.

Plus has more capabilities

Shopify Plus is a platform meant for larger sellers, offering more support, scalability, and function than Shopify's lower-tiered plans. The Plus subscription plans also come with a Merchant Success Manager, which helps businesses optimize their use of Shopify's platforms and "identify new opportunities for growth, expansion, and efficiency." And, while Shopify's other subscription plans can be renewed or cancelled on a monthly basis, Plus plans come with annual or multiyear subscription options. 

Later this year, the company will launch a new Shopify Plus platform, revamped to better meet the needs of businesses with multiple locations in multiple countries selling merchandise in multiple currencies. During the company's conference call, COO Harley Finkelstein said:

"Shopify Plus is set to become an even more compelling solution for complex and large-scale businesses when we release our new Shopify Plus product later this year. ... Shopify Plus will give merchants an overview of the performance at every single one of their stores with the ability to manage all stores, staff accounts, user permissions, and automation tools ... in a single place."

Plus has more customers

While many Shopify Plus sellers have graduated from the company's lower ranks, the majority of Plus merchants are new to Shopify's platform. And Plus is beginning to attract some of the largest manufacturers and consumer packaged goods conglomerates in business who are looking to create brand-specific stores on the platform. Launching on Shopify Plus this quarter alone were hardware companies such as Sony Corp. and Dolby Laboratories, beer giant Heineken, and celebrity-driven brands such as The Katy Perry Collection and Kylie's Skin, Kylie Jenner's new skincare line. 

Even better, Staples Canada, one of the largest office supplies retailers in Canada, shifted its entire online retail operations onto the Plus platform. If more brick-and-mortar companies, struggling to keep up in today's digital retail landscape, decide to move their operations onto the Shopify Plus platform, its growth could be just getting started.

Plus has more growth

Shopify's revenue is divided into two segments:

  1. Merchant Services, the add-ons merchants can add to their plans such as delivery options, payments, and marketing tools.
  2. Subscription Solutions, consisting of the subscription fees merchants pay Shopify.

In Q2, Subscription Solutions revenue grew to $153 million, a 38% increase year over year. Monthly recurring revenue (MRR), calculated by multiplying the number of merchants by the average monthly subscription plan fee, rose 34% to $47.1 million, largely driven by an increase of new customers subscribing to Shopify's platform. 

While this growth is heady, Shopify Plus revenue is growing faster, continuing to eat up a larger share of the MRR every quarter. In Q2, Shopify Plus grew to $12.4 million, a 53% increase, representing 26% of Shopify's total MRR. As Plus grows faster than total MRR, it will continue making up a larger chunk of its entire Subscription Solutions revenue.

Summing it up

While the company is firing on all cylinders, Shopify's rapid stock price appreciation has given it a near-silly valuation. Based on its trailing-12-month revenue of $1.3 billion and a $40.5 billion market cap, shares are currently trading at a price-to-sales ratio of over 31. Even for a company growing its top line at a near-50% clip, that valuation is incredibly steep. Whenever shares are priced this high, volatility should be expected.

That being said, for patient shareholders with a sufficiently long-term outlook, buying and holding great companies is one of the surest ways of compounding wealth in the stock market. I strongly suspect this case will be no different, which is why Shopify shares occupy a place in my personal portfolio.