Why Shopify (TSX:SHOP) Stock Still Has Huge Upside Potential!

The biggest growth and dynamics on the TSX is undoubtedly Online shop (TSX:SHOP)(NYSE:SHOP). It’s been that way since the company’s IPO a few years ago.

The growth that Shopify has been able to generate is simply out of this world. The company has been breaking earnings records every quarter. Analysts are setting the bar higher for growth, and Shopify continues to easily clear the bar. When it comes to growth, Shopify is a stock that every investor wants to own right now. I think the growth potential for Shopify is huge, and this stock could continue to grow this year.

E-commerce growth unlikely to slow down

The only real headwind Shopify could face right now is a slowdown in e-commerce growth. Some expect the post-pandemic world to be one where we’ll see a rise in brick-and-mortar sales, with e-commerce feeling the brunt of that shift. The thesis is that consumers are so eager to shop at their favorite mall that they’ll stop shopping online to put on their shoes and head out the door. I think that’s an unlikely scenario. While I think customers will return to brick-and-mortar shopping, it will simply be a complement to their online shopping habits.

I think the pandemic has structurally changed the way businesses have to operate long-term. I think that as businesses see a larger percentage of their sales moving online, it will be difficult to return to more traditional business models. In other words, I think the transition costs of shutting down an e-commerce business powered by Shopify are too high.

This change for existing businesses is one thing — I think the focus will be on new small and medium-sized businesses (SMBs) that will emerge from this pandemic. Indeed, if you believe this recovery will be strong over the next few years, the rise of new SMBs could take Shopify’s growth to the next level.

There is risk, so invest carefully

I believe Shopify is a company that investors need to own for the very long term. It’s either a “forever” position in your portfolio or one that doesn’t fit your risk profile. Personally, I’m a conservative, fundamentals-based investor, so Shopify isn’t really on my radar. That said, I definitely see the value in owning this growth gem for the long term.

The risks surrounding the company’s valuation are evident today. In fact, I believe these risks are more evident than ever. The last time we saw growth stocks exhibiting these types of valuations was the dot-com bubble. As we all learned, things did not turn out well for those who bought at the top.

But those who didn’t own Shopify have lost out on the leadership that this stock provided to the TSX. Like it or not, if you own a Canadian index ETF, a large portion of it is Shopify. I think it will remain that way for some time.

The article Why Shopify (TSX:SHOP) Still Has Huge Upside Potential! first appeared on The Motley Fool Canada.

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Fool contributor Chris MacDonald has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify.

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