Shopify has been one of the most explosive stocks in recent years. The Canadian company helps small and medium-sized businesses create e-commerce sites. Since 2016, the stock has been up an incredible 2,400%. But the growth stock sell-off has seen Shopify's shares slump 56% so far in 2022.
Shopify announced a 10-for-1 stock split on April 1, so perhaps the announcement’s momentum can help life the share price. Note that stock splits don’t change shareholders’ ownership portions but they create enthusiasm from potential investors who appreciate the resulting lower price per share.
Despite the stock's steep decline, the company's prospects remain excellent. Of course, customer and revenue growth will not be as explosive as it was during the pandemic. Still, over the long run, more and more spending will be done through digital channels, an area where Shopify excels.
The pandemic was undoubtedly a boom for the business; revenue nearly tripled from $1.6 billion to $4.6 billion from 2019 to 2021. Perhaps equally as important, many of the customers Shopify signed up during the pandemic will likely stick around long term. Shopify has basic plans for merchants starting at as little as $29 per month and much higher for a comprehensive suite of services. So it's not likely that the boom from the pandemic will be short-lived.
In the last two years, the rise in sales was enough for Shopify to generate positive operating income, turning the corner from a $141 million operating loss in 2019 to $269 million in operating income in 2021. Further, it boosted cash from operations from $71 million to $504 million over that same time period. While Shopify may not attract as many new clients as it did during the initial stages of the pandemic, its current scale is large enough to generate healthy operating profit and cash flow.
Overall, surging revenue fueled by powerful, long-lasting tailwinds and discounted prices caused by the growth stock sell-off make The Trade Desk and Shopify excellent stocks to buy in 2022 and beyond.
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