This is my first look at Shopify Inc (NYSE:SHOP), the Canadian-based company that provides an e-commerce platform for small and medium-sized businesses. To me, it feels most similar to eBay Inc (NASDAQ:EBAY) in that it doesn’t sell end-user products, carry inventory or sell any kind of business. It’s just a platform to help businesses — a middleman.

Any kind of business like this is one that gets my attention. If it achieves scale and executes properly, it can become extremely profitable. If one takes the gross merchandise volume metric as a sign of success, it is pretty darn impressive, showing significant growth.

Shopify generates revenues with two models. First is the subscription angle. Every month, Shopify brings in revenue by charging anywhere from $29 to $2,000 for access to the platform and for hosting. For the most part, considering average monthly revenue comes out to about $50, basic and regular plans make up the vast majority of Shopify customers.

This means that most of Shopify profits are driven by new businesses that are still growing and still looking to find their footing. Many businesses fail, so while the subscription model is attractive, much of Shopify’s success will depend on churn.

I do not like the fact that Shopify management does not share those numbers. To me, that smells like it’s trying to hide something. The good side of this is that Shopify can upsell businesses that are growing and doing well.

The other side of the revenue equation is through payments, via payment-processing fees and credit card payments. Thus, the more successful businesses become, the higher this tier of revenue will be.

Thus, Shopify success is going to hinge on the extent to which it can own the market for its services, and how successful its business customers are. Time will tell on both of these metrics, so buying Shopify stock is a bet on how this will spin out. The good news is that we can examine metrics on a quarterly basis and get a sense of the trend.

So far the trend is quite favorable. The U.S. economy is showing exceptional signs of life. Virtually every underlying and retail metric on economic health is strong. This bodes well for Shopify stock.

In considering any possible recession, I think Shopify may be able to survive. If you consider that most businesses fail, a recession wouldn’t change how many fail by a terribly large amount. It might dissuade others from starting a business, but that would be temporary. So a recession would provide headwinds, but probably not sink the ship.

As with all of these newer companies, I struggle with valuation. Shopify currently sells for 20x revenues, at a valuation of about $12 billion. It isn’t making a profit, yet.

However, as opposed to most businesses that don’t really do anything special and have insane valuations, Shopify stock has potential. eBay showed the power of being a middleman and so did Amazon.com, Inc. (NASDAQ:AMZN) for awhile.

Bottom Line on Shopify Stock

Now, given that the market is extremely stretched, I would not buy Shopify stock here. However, if the market corrects significantly as I expect it will, I might just take a small position and hold for the very long term.

Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance, and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He does not own any stock mentioned. He has 23 years’ experience in the stock market and has written more than 1,800 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.