Shopify (SHOP +2.92%) has taken its investors on a wild ride in the 10 years since its initial public offering (IPO). The e-commerce services provider went public at a split-adjusted price of $1.70 on May 21, 2015, soared to a record closing price of $169.06 on Nov. 19, 2021, but now trades at about $106.
A $1,000 investment in its IPO would have briefly blossomed to $99,447 at its peak, but would still be worth about $62,350 today. That 62-bagger gain would have easily beaten the S&P 500's gain of roughly 170% over the past decade.
Let's see why Shopify outperformed the market -- and why it might still be the ultimate growth stock to invest another $1,000 in right now.
Image source: Getty Images.
Why is Shopify growing so rapidly?
The company's self-service e-commerce platform lets merchants easily set up online shops, process payments, fulfill orders, and manage their marketing campaigns. This one-stop shop lets sellers build their own e-commerce businesses, making it an attractive alternative to joining a crowded third-party marketplace like Amazon.
NASDAQ: SHOP
Key Data Points
The company's early growth was fueled by smaller businesses. But it's been attracting larger merchants with Shopify Plus platform, which provides added support for growing businesses, offering more loans through Shopify Capital platform, and unifying all of its scattered merchants with the consumer-facing Shop app. It also tethers its merchants and customers to its Shop Pay platform for digital payments.
Gross merchandise volume (GMV), gross payment volume (GPV), and total revenue skyrocketed in 2020 as the pandemic drove more merchants to expand their digital storefronts. But growth cooled over the following two years as it lapped that spurt and inflationary headwinds throttled consumer spending. Many of its smaller merchants also struggled with Apple's privacy-focused changes on iOS.
|
Metric |
2020 |
2021 |
2022 |
2023 |
2024 |
|---|---|---|---|---|---|
|
GMV growth |
96% |
47% |
12% |
20% |
24% |
|
GPV growth |
110% |
59% |
24% |
29% |
32% |
|
Revenue growth |
86% |
57% |
21% |
26% |
26% |
Data source: Shopify.
In 2023 and 2024, top-line growth accelerated again. That was driven by a growing number of enterprise clients, including Reebok, Champion, and Warner Music; overseas expansion; Shop Pay's growth; and the rollout of new AI tools (like Shopify Magic), which helped merchants streamline their operations.
It also integrated itself with Amazon's "Buy With Prime" buttons, Alphabet's YouTube Shopping, and Roblox's gaming worlds. Declining interest rates and cooling inflation also generated fresh tailwinds for its merchants, and they generated record-breaking Black Friday and Cyber Monday sales in 2024.
How did Shopify turn profitable again?
In 2022, the company posted a steep net loss as it grappled with unrealized losses from some equity investments, higher operating expenses, and the acquisition and integration costs related to the fulfillment start-up Deliverr to expand its first-party logistics network.
But in 2023, Shopify turned profitable again as it abruptly divested its money-losing logistics division, laid off thousands of employees, and aggressively reined in spending. In 2024, its earnings per share (EPS) increased another 50% as it continued to cut costs and expanded higher-margin subscription services.
What's next for Shopify?
From 2024 to 2027, analysts expect revenue to have a compound annual growth rate (CAGR) of 22%, as its EPS rises at a CAGR of 8%. Near-term earnings might be squeezed by the unpredictable tariffs -- which could affect a lot of its merchants that rely on overseas supply chains -- as well as the company's focus on attracting bigger enterprises, which generally require longer sales cycles and onboarding periods.
But over the long term, Shopify will keep expanding as long as businesses want to forge their own online identities instead of joining bigger marketplaces. It might not replicate massive gains from the past decade, but it's still a great growth stock to buy with $1,000 (or more).
