Why I'm So Bullish on Shopify

Speak to anybody who knows me, and they’ll tell you I’m ALL-IN on Shopify. Without a doubt in my mind, I fully expect it to be part of the Big 5 tech stocks over the next 5-10 years.

As Warren Buffet said, “only buy something that you’d be perfectly happy to hold if the market shut down for 10 years”. Shopify is by far the biggest position I have, and I plan on holding it forever!

Most people look at its price and they see a stock that’s still trading in the shadow of its November 2021, COVID high - a time when e-commerce was booming and even Allbirds was trading at $29 a share. I think we were all a little naive back then.

But looking beyond their 2022 crash, you’ll see a stock that has rallied more than 200% in that time, and a company that has an incredibly bright future for a number of reasons which I’ll outline below.

Five Reasons I’m Bullish on Shopify

1. They think and act like a startup: They have a really entrepreneurial culture, attract the very best talent, don’t micro-manage and consistently release products before their competitors (even if some of them do miss the mark.. yeah I’m looking at you Shopify Subscriptions).
   
   In 2023 alone, they launched more than 200 new tools and product updates. It’s mind blowing to think they can do this! They are also quick to double-down on products which are working, and to kill ones that aren’t - for example their sale of Deliverr less than a year after acquiring it for $2.1bn.

2. Their competitors - well, they suck: BigCommerce’s stock price has crashed from $130 in 2020 to $5 right now and they’re losing more market share to Shopify every quarter. WooCommerce’s reliance on WordPress means their market is shrinking with the product less accessible for first-time founders - and that was before this weeks drama with WP Engine! Magento meanwhile.. lets not even get into it!
   
   Millions of new businesses are started each year and Shopify is becoming the go-to brand for new entrepreneurs.
   

3. Shopify Plus is killing it: After years of sidestepping the enterprise market, they’re finally focusing on Shopify Plus and have a solid sales function in place. A couple of years ago they were heavily reliant on their marketing team and organic growth. We kicked Shopify Capital’s ass in the early days at Wayflyer, but now they’ve come back strong with a good sales team and an effective outbound strategy.

   
   Recently Shopify Plus have brought in some whales like Nike, Gymshark, Dollar Shave Club and Barnes & Noble (and are eating Salesforce’s lunch). Penetration of the enterprise market might be slower than investors like, but when you look at their pace of innovation relative to competition, it’s not a fair fight. I have fairly high conviction that they'll be a huge player in enterprise commerce on a three-year horizon.

4. D2C is here to stay: Almost all brands these days start online. They don’t start in retail, they don’t even start on Amazon - they’re all launching on Shopify! It’s incredibly early in their lifecycle, but the biggest brands of tomorrow (the next Coca-Cola, Gucci, Rolex) will all be Shopify native.
   
   I also expect the number of entrepreneurs to continue growing over the next 20 years as it becomes easier than ever to start a business. Less money is required up-front, tutorials are available online and entrepreneurship has become cool again. A lot of this new wave will begin (and scale) their journey on the Shopify platform.

5. They’re tapping some rockstar execs: Shopify have a worldclass leadership team. Harley, Kaz and David Wurtz among others have been delivering for years. But in the last few months they’ve gone and hired some pretty major Microsoft execs, including Mikhail Parakhin who has joined as their new CTO. What does this tell me? Microsoft highly rates Shopify, and I wouldn’t be surprised to see a much stronger partnership formed there over the next 24 months.
   
   They’re also locked in with Stripe, who are now processing 1% of global GDP.

But, is the stock overvalued?

Is it currently over-valued on a Price:Earnings ratio? Yeah, it is. But investors often pay it forward where they have a strong conviction on a company’s ability to deliver on future earnings. And for all the reasons outlined above I expect them to keep gobbling up market-share in a growing market.

Currently they’re at ~$9bn of revenue. For comparison, Netflix are at ~$30bn of revenue as the leader in the content market which has a TAM of ~$100bn. Shopify will be at least as strong a leader within B2B SaaS for Commerce and this has a TAM of ~$400bn (according to their latest investor report). So yeah, there’s plenty of room for growth.

I bought Shopify stock in October 2022. I bought it again when it dipped after the Q1 2024 report, despite it already being my biggest position. And I’m going to do it again at the next dip! Within the next 5-10 years, I fully expect Shopify to be sitting alongside the Big-5.