Premium content from Motley Fool Share Advisor UK
Our monthly Fire Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of growth-focused Fire recommendations, to help Fools build out their portfolios.
“Best Buys Now” Pick #1:
Shopify (NYSE:SHOP)
- While Shopify derives most of its revenue from taking slices of transactions processed on its platform, the true value is in the ecosystem it creates.
- Core ecommerce functions such as payment processing, point-of-sale systems, and marketing are only a few of the value-added options that merchants have when it comes to using Shopify as a commerce platform, and each of these is a vital piece of its increasingly sticky pie.
- For small business customers possibly lacking IT expertise, it’s perhaps unlikely that they’d switch e-commerce platforms. For enterprise accounts, they’re likely drawn to competitive pricing (despite price increases), quick implementation and ease of use.
- In its first quarter, sales growth was 27% taking sales to $2.9bn. Sales growth was driven by growth in the merchant base, same-store sales of existing merchants and international expansion.
- In our view, the company remains well positioned to continue growing, including continued merchant growth, greater Shopify Payments penetration, impressive international sales, and larger retailers joining the platform. As the company scales we believe the operating margin might tick up from the current 13.9%.
- While tariffs might complicate cross border trade, the company is making handling tariffs easier for merchants after building tools for handling duties calculations, as well as filters to view products made in a particular country. While not immune from tariffs, the impact should be manageable, given cross-border trade makes up 15% of gross merchandise value.
