Shopify Inc Stock Is a Big Winner in an Increasingly Decentralized World

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Shopify stock - Shopify Inc Stock Is a Big Winner in an Increasingly Decentralized World

Source: Shopify via Flickr

My favorite secular winner in today’s market is Shopify Inc (US)(NYSE:SHOP). Shopify stock has a great future for lots of reasons.

First, here’s some context: The whole market is still somewhat freaked out by higher interest rates right now. We got that scary good wage growth number at the end of January. Investors went to sleep, saw the Inflation Boogeyman, and decided to sell like crazy over the next week and a half.

Markets bounced back from that after the S&P 500 tested and held its 200-day moving average in early February. That put bulls back in control. Strong earnings growth came back into the spotlight. Inflation went away. Markets rallied.

Then new Fed Chair Jerome Powell tried to cool that rally by sounding an uncomfortably hawkish tone earlier this week. The Inflation Boogeyman is back. And markets are well off their post-correction highs.

But putting all that aside, there are some stocks in the market that are worth buying because they will be worth 10 to 20-times as much as they are today, regardless of what happens with inflation over the next 12-24 months.

These stocks are the secular winners. They may face some headwinds in the near-term as market volatility ratchets up with inflation. But longer-term, these companies will explode in value.

Shopify Is a Key Player in Tomorrow’s Decentralized World

I’ve said it before, and I’ll say it again: Shopify stock is the most exciting stock in the market with huge upside potential in the long-term.

My original thesis was pretty simple. This is a company which provides cloud-hosted digital commerce solutions for retailers of all sizes, but the company does focus on small to medium sized businesses who can’t really compete with the digital ops of Amazon.com, Inc. (NASDAQ:AMZN) and Walmart Inc (NYSE:WMT).

In this sense, the stock is a pure play on two really big secular trends: the widespread adoption of cloud-hosted solutions, and the rampant rise in digital commerce.

The other company which has made a killing off those two secular trends? Amazon. The connection seems natural, and therefore, the upside for Shopify stock seems highly enticing.

But that original thesis did not incorporate arguably Shopify’s biggest long-term catalyst: decentralization.

Decentralization and Shopify Stock

The more I’ve thought about the bitcoin mania that swept over markets in late 2017, the more I realize that it wasn’t really about bitcoin or even blockchain. It was all about decentralization.

Bitcoin is really just a decentralized currency, whereas everything blockchain is built on a decentralized system. In other words, the underlying principle that everyone got so excited about was decentralization.

And that makes a ton of sense. We are already seeing how powerful and effective decentralization at scale can be.

Just look at Uber. The ride-sharing giant altered the entire transportation industry by decentralizing the system, allowing anyone to be a driver, and subsequently playing the matching game with drivers and riders.

Or look at Airbnb. That company has altered the entire accommodation and travel industries by decentralizing the system, allowing anyone to a be “hotel”, and subsequently playing the matching game with hosts and guests.

Then there is Postmates, which does the exact same thing for delivery. Turo, which does the exact same thing for rental cars. OpenAirplane, which does the same thing for private planes. Darkstore, which does the same thing for fulfillment centers.

This trend is taking place all around us. Systems are decentralizing.

Shopify stock is at the heart of this trend. The digital commerce solutions giant has altered the e-commerce game by decentralizing the system, allowing anyone to be a digital retailer, and subsequently playing the matching game between retailer and buyer.

The big kicker here is that thanks to decentralization trends at large, all these digital retailers are starting to even the playing field with the Goliaths of the industry.

In the future, all of Shopify’s merchants will have their own low-cost, quasi-fulfillment centers around the globe (see Darkstore) and delivery methods for those goods (see Uber or Postmates).

What does all that mean for Shopify stock? Lots of upside. As their merchants grow, so does Shopify’s business.

Bottom Line on SHOP Stock

Expect near-term turbulence because this is an increasingly volatile market and SHOP stock is richly valued.

But in the long-term, I’m hard-pressed to find a stock with a better growth narrative than Shopify stock. It is a pure-play on what I see as 3 of the biggest trends in the world right now: cloud, e-commerce, and decentralization.

All three of those trends appear to be simply gaining momentum, especially the decentralization trend. Consequently, I remain bullish on Shopify stock for the long haul.

As of this writing, Luke Lango was long SHOP and AMZN. 


Article printed from InvestorPlace Media, https://investorplace.com/2018/03/shop-stock-big-winner/.

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