Investors in Shopify (NYSE:SHOP) have enjoyed the stock’s strong move up so far in 2019. On Mar. 4, the Shopify stock price saw an all-time high of $194.80.

Now that the earnings season is behind us, let’s look at what may be next for SHOP stock, which has been a darling of Wall Street since its IPO in 2015.

Strong Fundamentals

On Feb. 12, the company came out with strong Q4 2018 earnings that beat Wall Street consensus on both the top and bottom line. Shopify reported revenues of $343.86 million, beating the estimate by about 5%. SHOP’s projected annual revenue growth is over 30%. Shopify’s year-on-year operating income was also up 72%.

In a nutshell, Shopify sells out-of-the-box ecommerce solutions. The company’s growth comes from two segments, “Merchant Solutions” and “Subscription Solutions.” Merchant Solutions which provide tools merchants to serve their customers better and sell more. Subscription Solutions which offer merchants of all scales monthly recurring subscription plans that range from under $10 to over $2,000.

Shopify Plus, the premium version of Shopify, has now over 5,300 merchants, including names like Johnson & Johnson (NYSE:JNJ), Unilever (NYSE: UL), and the Obama Foundation.

A quarter of the company’s monthly recurring revenues comes from Shopify Plus merchants. Because the company’s gross margins are about 50%, analysts highlight the importance of the monthly recurring revenue (MRR) for the future strength of the company.

After the earnings call, investors cheered many of Shopify’s competitive advantages, such as the balance sheet without any debt and over $2 billion in cash and marketable securities. This cash strength would help Shopify pursue acquisition opportunities globally as it makes its platform easier to use and to bring specific talent or technology to the company.

For example, in 2016, it acquired Kit CRM and Boltmade, two privately-held small companies. Later in June 2018 it bought Return Magic, a mobile app that specialized on making it easier for customers to return products.

During the conference call, CEO Tobi Lutke stressed that the company would continue to innovate and deliver products as well as services for both the merchants and their customers.

International Expansion and Shopify Stock

Management is also looking at international expansion, especially in non-English-speaking countries, as the next strategic area of growth.

Shopify recently launched its payment gateway, Shopify Payments, in Germany, making bank account transfers possible. Several of Canada’s provinces are using Shopify as their cannabis website storefront, giving Shopify even more global visibility.

In its efforts to expand beyond the core English-speaking countries, including the USA, Canada, the UK and Australia, the company has recently made the Shopify website available in six other languages: French, German, Japanese, Italian, Brazilian Portuguese, and Spanish.

In other words, Shopify is an attractive company with excellent growth prospects in cloud-based e-commerce business, both in North America and globally. However, investors also need to be aware of some question marks regarding the company.

What Could Derail SHOP Stock?

On the opposing side of the coin are the nervous investors and short-sellers who are looking for any excuse to short Shopify stock. Shopify critics were not entirely impressed with the recent earnings call which showed a slowing down of growth on a relative basis.

Shopify has yet to post profits for investors. However, the non-profitability of Shopify does not yet seem to concern investors who continue to believe the long-term story of Shopify. Yet if it cannot keep up with the aggressive growth assumptions, then shareholders may become more concerned with the lack of profits and its margins and the stock price could suffer.

The bears further point out that SHOP stock’s hefty valuations would be hit in case of an economic slowdown. If the broader market go not go up as rapidly as they over the past decade, then the momentum in high-flying stocks like SHOP would slow down, too.

Then there is the constant threat of Amazon (NASDAQ:AMZN) taking a bite off Shopify’s revenues, which would affect the Shopify stock price negatively.

Finally, many investors are quite concerned about the various reports by short seller Citron Research which regards Shopify’s business model and marketing claims a “get-rich-quick-scheme.”

The Bottom Line on Shopify Stock

Since the record Christmas Eve decline in the broader markets, Shopify stock has had impressive comeback. Therefore a slight pullback toward the higher $150’s level might still occur in SHOP stock in the next few weeks.

SHOP is a growth as well as a speculative stock. Therefore, in the coming weeks, I expect its price to be a battleground between investors and traders. While long-term investors would like to see Shopify go over the $200 level, traders are likely to keep the range between $205 and $155.

If you already own SHOP stock, you might want to hold your position. However, within the parameters of your portfolio allocation and risk/return profile, you may consider placing a stop loss at about 5-7% below the current price point.

Well-performing stocks tend to keep on winning, and the recent strength of Shopify stock might be a good indication that within three or four years, investors who buy SHOP are likely to be rewarded handsomely.

As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.