In the nearly seven years since Shopify (SHOP 1.55%) went public, it has revolutionized the way business does e-commerce. By providing companies of any size with the tools to start, grow, market, and manage retail businesses, it's made the migration of even the tiniest business to the online world seamless and almost effortless.
The path hasn't been as smooth for Shopify or its investors, who in 2021 alone saw their stock lose 17% of its value from its highs (though shares were still up 22% for the year). But it's largely been a fast ride higher since the company went public.
That means there has mostly never been a bad time to buy Shopify stock. So let's see how much you would have today had you had the foresight to buy in at the e-commerce leader's initial public offering with a $1,000 grubstake in the business.
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Here's how Shopify became a dominant industry force in six years
For as little as $29 a month, an entrepreneur working out of their basement can be on equal footing with global brands thanks to Shopify's suite of products. And entrepreneurs have responded.
Shopify president Harley Finkelstein recently noted, "It took 15 years for our merchants to get to $200 billion in cumulative GMV (gross merchandise volume), and just 16 months to double that to $400 billion."
That's because Shopify's platform not only appeals to the little guy, but increasingly larger companies are also finding value. From Heineken and Molson Coors to General Mills, Logitech, and Kraft Heinz, Shopify is turning into the go-to resource for e-commerce as it expands the tools companies can use.
Shopify has grown from the early days when it simply gave an online presence to a company. Along the way it has added point of sale capabilities; payments options; multichannel opportunities for businesses to sell on Amazon, Facebook, and Pinterest; small business loans; and even order fulfillment.
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A commanding share of the e-commerce market
Although Amazon naturally dominates the e-commerce space with a 39% share of the market, more than the next 10 biggest competitors combined (by a sizeable margin), Shopify actually has the second-biggest share of U.S. e-commerce retail sales with nearly 9%, which places it comfortably ahead of Walmart at 5.8%.
Revenue grew 46% in the third quarter to $1.12 billion, and while Shopify doesn't provide specific guidance, it says the fourth quarter is expected to contribute the greatest amount to full-year revenue.
Merchant solutions revenue gained 51% in the period, expanding to $787.5 million, while subscription solutions reached $336.2 million, up 37% year-over-year. GMV was also $42 billion for the period, a 35% increase, but came in below analyst projections of $43.4 billion, which helps account for the stiff drop in Shopify's stock.
Still, Wall Street foresees business growing at a heady clip, with analysts expecting revenue to rise at a compounded rate of over 40% annually for the next five years. They see sales growing from $2.9 billion to over $16 billion by the middle of the decade.
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Here's how much $1,000 invested in Shopify half a dozen years ago is worth now
So what has all this meant for Shopify's stock so far? If you had invested $1,000 in Shopify's IPO, which it priced at $17 a share on May 21, 2015 (above the proposed range of $14 to $16 a share), you would be enjoying a 5,340% return on your investment, compared to the 124% the S&P 500 index generated over that same period.
That's more than 40 times the return of the broad market index, and means $1,000 would be worth around $54,500 today. In contrast, the same money put into an index fund would be worth about $2,240.
There's good reason to believe Shopify can continue generating outsized returns for investors. It sees its total addressable market as a $153 billion opportunity, and it's only begun scratching the surface of a subscription-based model that will give it greater levels of recurring revenue at higher margins. Adding new offers such as livestream shopping events, click-and-collect services, and cross-border sales channels means there is plenty of room for growth.
