A massive quarter from Shopify (Shopify Stock Quote, Chart, News NYSE:SHOP) sent shares through the roof, but if you can believe it, there’s more where that come from, says David Burrows of Barometer Capital, who says buy the name if you’re looking for e-commerce exposure.
“From a market backdrop standpoint I think this year is probably a pretty good year. You’re not going to see a lot of volatility. I think that politics aren’t going to play a big part,” said Burrows, president and chief investment officer at Barometer, who appeared on BNN Bloomberg Wednesday.
“So, you want to own strength in the market.”
“Shopify is one of those companies where if you make a mistake it’s going to be costly, but they’ve got a lot of tailwinds. If you’ve got a portfolio of 20 investments, this could be one of them. And recognize that you may need to stop yourself out if it doesn’t work,” he said.
Shopify’s share price soared as high as $593.89 before ending the day on Wednesday at $531.21, up almost eight per cent, as the markets reacted to the company’s fourth quarter earnings which saw revenue grow by 47 per cent and topped analysts’ estimates at $505.2 million versus the consensus $481.6 million. (All figures in US dollars.)
Gross merchandise volume, which figures the value of all goods sold on Shopify’s platform, jumped 47 per cent year-over-year, proving that the company was firing on all cylinders over the holiday season, while management guided for the upcoming year at revenue between $2.13 billion and $2.16 billion, higher than the Street’s average forecast of $2.12 billion.
“Shopify’s merchants had a tremendous fourth quarter, powered by our ongoing efforts to help them sell more and manage their businesses more effectively,” said Amy Shapero, CFO, in a press release. “Our investments to enhance our product offerings and expand internationally are attracting entrepreneurs worldwide and helping them succeed, as demonstrated by strong GMV growth in 2019. In 2020, we will continue to invest in our portfolio of growth initiatives to better serve merchants and energize the flywheel well into the future.”
Burrows says Shopify’s allure rides on the surge in e-commerce as well as its rock-solid hold on small- to medium-sized businesses, an area neglected by the much larger Amazon.
“Amazon has sort of pushed them away or made it difficult for them to do business,” added Burrows. “I talk to retailers —some big ones in Canada that we all know— who said this year the light went on. If you hadn’t done something by this point, you’re in trouble because everything went to light speed this year in e-commerce and digital retailing. Shopify is your way to play that.”
Burrows said there are limited choices for investors as far as online retail goes, and both Shopify and Amazon now have the sponsorship from investment institutions who are looking to participate in the space.
“If you’re not going to own Amazon, I would own Shopify. We own both, among lots of other positions. We’re all about finding structural change and owning companies that are good and getting better, and the fundamentals are coming through [for Shopify]. They reported great earnings and they’re probably going to grow their revenue another 47 per cent this year,” Burrows said.
“Can it pull back to $500 from $530? Absolutely, but I think that it continues to work its way higher,” he said.