Here's a Trillion-Dollar Tailwind for Shopify Stock

According to data published by the Census Bureau on Aug 19, second-quarter e-commerce sales in the U.S. were over $220 billion. While this is a big number, it represents just 12.5% of total retail sales in the U.S., suggesting that the e-commerce revolution still has a long way to go. And if e-commerce truly has a lot more room to grow, that's great news for Shopify (SHOP -2.04%).

In this video from Motley Fool Backstage Pass, recorded on Nov 11, Fool contributor Danny Vena talks about his belief that e-commerce penetration could potentially double or more from where it is today. Fellow contributors Jason Hall and Jon Quast agree and, if true, that would grow Shopify's addressable market by over $1 trillion.

Danny Vena: Well, we're actually going to go with the number two and three positions in my portfolio, which ended up being the number one and two positions in the ranking. We're going to start with number two.

Number two is Shopify. Now, for those who may not know, imagine that you are a mom-and-pop business, that you want to sell your goods and services on the internet. You may have a small brick-and-mortar facility and you might want to sell things online. There are a lot of things that have to happen in order for you to be able to do that. You need to get a website built and it needs to look professional. You need to link your e-commerce to that site. You need to integrate your payments. You need to integrate shipping. You need to have cross-stocking and fulfillment services. There are so many things that a merchant needs to do in order to move from being a brick-and-mortar store to being an internet business and Shopify provides all those tools.

If you have been with them for a while and you have a period of time where you need small business loan, they already know what your business does on a regular basis. You don't have to apply to the bank and fill out 17 million forms. You go to Shopify and say, "hey, I want to get a small business loan" and they can make that loan based on your history.

It's interesting because when we first started doing shows on Motley Fool Live a little more than a year-ago, but closer to a year-and-a-half ago, one of the questions that we talked about when we were talking about Shopify was Shopify has over one million merchants. Can it get to two million? Well, actually now Shopify has 1.7 million merchants and it's grown from one million to 1.7 million in less than the last two years.

Now the question becomes, can Shopify grow to three million, or four million, or five million merchants? I think the e-commerce boom is only starting. If you look at the latest numbers from the Census Bureau, the percentage of retail sales that were made via e-commerce in the last quarter was somewhere in the neighborhood of 11% in the United States. That's more than double what it was a decade ago. I think it could double again and potentially double again. That is where Shopify's opportunity presents itself.

Jason Hall: It's interesting to the business is doing a lot more. That is talking about what you were leading off with there. What it can offer to its customers is continuing to expand without the business getting so unwieldy that it's diversification becomes worsification. It's adding things that support its customers and makes it even more sticky and harder for them to walk away and more likely to want to stay and give them more money every single month. I have a ton of conviction in Shopify.

Vena: What about you, Jon?

Jon Quast: This is interesting. We all ranked this one number two. It was the only one that we agreed on across the board. We didn't agree on number 1 but this number two, we-all had a very high conviction.

I think, Danny, you're right on with the big-picture thinking that you're bringing to the table of what is the percentage of e-commerce sales to regular sales. Still actually amazingly, surprisingly low when you think about the grand scheme of things. Does that have the potential to increase to double, to triple from where it is today? I think the general answer is yes. E-commerce is going to be more in the future, not less. And so a top-tier company, a top performer, just razor-sharp execution in a company like Shopify with a growing industry, that's not something that I want to take the other side of that bet [laughs]. I'm betting on success going forward and so that's why I've ranked Shopify where I did.