Even as the major market indexes are topping fresh highs, there are plenty of great growth stocks out there that have been punished as some investors have turned their focus to “recovery” stocks. Investors with the right mindset and a sufficient investing time horizon of three to five years will be able to benefit from the short-term thinking that is currently plaguing these otherwise stellar companies.
Some of the stocks that have been hardest hit in recent months offer a killer combination of best-in-class offering, a large and growing addressable market, and a massive secular tailwind that could provide life-changing returns — and they are currently on sale.
Let’s look at three stocks that meet those lofty criteria and could help set you up for life.
Shopify: Riding the wave of accelerating e-commerce adoption
One fact that became undeniable over the course of the past year is that not only is digital retail here to stay, but the opportunity is much bigger than many imagined. Global e-commerce sales are expected to climb to $4.9 trillion in 2021. Even more impressive is the fact that nearly 20% of every retail dollar is expected to come from online sales. That represents a large and growing opportunity for Shopify (NYSE:SHOP).
The company is the leading provider of e-commerce solutions to business. Yet, what began as a way to level the playing field for small and medium-sized companies quickly grew to include services for large enterprise as well.
Shopify provides merchants with cloud-based solutions that include everything they need to set up and maintain a digital retail operation. It offers tools to simplify operations for businesses that sell across multiple online sales channels, including web, mobile, social media, and online marketplaces — as well as brick-and-mortar stores. Shopify handles many of the day-to-day details that are key to success, including product management, inventory, payments, and shipping, while offering value-added services like working capital loans.
Given the stock’s 23% decline so far this year, you’d be tempted to think its business is trailing off, but nothing could be further from the truth. Shopify’s first-quarter revenue grew 110% year over year, while subscription revenue grew 71%. This signals a large and growing foundation of recurring revenue upon which to build its future. Additionally, excluding a one-time gain, Shopify still grew earnings per share by more than 10-fold compared to the prior-year quarter.
With more than 1 million merchants under its wing, Shopify is the clear industry leader, but the opportunity that remains is vast. The company generated revenue of $2.93 billion last year, which pales in comparison to its total addressable market of $78 billion — and that’s just small and medium-sized businesses.