One of the best investing decisions I’ve ever made was buying Shopify (NYSE:SHOP) shares nearly four years ago. At the time, Shopify was not the well-known e-commerce stock it is today. Many analyst forecasts considered it to be risky — including a seasoned hedge fund manager that I had the good fortune to meet.
Despite all these warnings, I decided to go against the flow and my initial £1,000 investment has quickly turned into over £17,000.
An e-commerce giant ‘in hiding’
Shopify enables small and medium businesses to set up online stores to sell their products. But beyond the core e-commerce offering, it also comes with business analytics, search engine optimisation tools, social media marketing solutions and customer support systems.
The firm’s customers pay a monthly subscription fee, which includes all the hosting costs as well as access to the platform. New subscribers can have a polished online store up and running within a week without having to write a single line of web code.
Today, Shopify powers over 1,000,000 online stores, across 175 countries around the world.
Why I decided to buy Shopify shares
In 2017, building and maintaining a website was becoming increasingly more straightforward thanks to platforms such as WordPress. But these were mainly focused on blog-style sites, rather than online stores.
There were a few available e-commerce solutions beyond Shopify, such as Wix and WooCommerce. Perhaps the active competition is why analysts were initially sceptical as it wasn’t entirely clear which solution would end up on top.
But under the leadership of its founder, Tobias Lütke, Shopify was doing something its competitors weren’t. It was building strong partnerships with the likes of Facebook, Twitter and Pinterest. This gave the stock robust exposure to social media sites.
An even more impressive partnership was formed with Amazon. The e-commerce goliath used to provide a webstore solution for its merchants that it scrapped and replaced it with Shopify’s platform instead.
To my mind, if Amazon was willing to concede that Shopify had better technology, then the business must really be doing something right.
The Shopify share price continues to climb
Since then, Shopify has continued to form new partnerships that continue to add immense value to its platform and help to separate it from competitors.
The most impressive of these occurred in 2019. The stock formed a partnership with Deliverr that enabled any Shopify-powered store to offer free two-day delivery to their customers.
Lütke focused on building the platform’s value through meaningful partnerships. In my opinion, this is why the firm has been able to retain its customers while simultaneously attracting new ones.
Put together, Shopify has generated nearly $2bn in revenue over the past nine months. That’s almost three times more than the whole of 2017.
The bottom line
I bought £ 1,000 worth of Shopify shares at $57.89. Over the last four years, I felt pressure to sell, especially when Citron Research announced it was aggressively shorting the stock. But despite the temptation, I held on to my shares with a tight grip.
Today the same shares are worth just over $1,057 — an increase of 1720%. My only regret is that I didn’t buy more!
But would I buy the shares today? Absolutely! Small businesses need a way to adapt to the rise of e-commerce, and I feel Shopify offers the best and simplest solution so still has growth potential.
