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Wall Street Hedge Funds are Missing Out On This Stock.

Hello, my name is Jiayi Chen from Tradebase, and today I will be explaining one of my top stocks; Shopify Inc (NYSE: SHOP), and why it has the potential to outperform the market in 2024 significantly.

March 24 Weekly Rankings

1. Shopify 2. ⁠Nice Ltd 3. ⁠Eld Beauty 4. ⁠Advanced Micro Devices 5. ⁠EQT Corp 6. ⁠PayPal 7. Amplify Energy Corp 8. ⁠Microsoft 9. ⁠Tesla 10. ⁠The Trade Desk

Shopify Inc (NYSE: SHOP)

Shopify is the world’s leading platform offering an e-commerce platform that helps businesses easily sell products and services. Shopify has long been admired for the simplicity and straightforwardness with which merchants can set up storefronts on its platform. In recent years, it’s invested in and improved every conceivable merchant need, from providing point-of-sale software and hardware to extending its back office software to include cross-border sales tax compliance.

So, what makes Shopify especially compelling at this moment? I believe the company is currently leveraging significant scale advantages, driven by its technological superiority over competitors and its burgeoning brand influence. As highlighted by Tom Gardener during The Motley Fool’s recommendation unveiling, founder and CEO Tobi Lütke remains fundamentally focused on enhancing the functionality of the Shopify platform.

This meticulous attention to detail is yielding tangible outcomes. For instance, Shopify’s proprietary shopping cart payment technology, Shop Pay, demonstrates notably higher conversion rates compared to rival solutions — averaging at least 15% higher in completed transactions. Even Shopify president Harley Finkelstein states: “Our data also indicates that the mere presence of Shop Pay, even if unused by the buyer, results in a 5% increase in conversion, with usage potentially boosting conversion rates by up to 50% compared to guest checkout, surpassing all other accelerated checkout options by at least 10%. These trends are reflected in our performance.”

Furthermore, notable product enhancements such as “Hydrogen,” a robust programming environment tailored for large enterprises, enable intricate customization of storefronts. Despite this, Shopify has been consistently updating its program and maintaining its community; furthermore helping customers with their needs.

The convergence of product focus, brand resilience, and high-profile clientele has propelled Shopify to achieve consistent double-digit growth. In its most recent quarter, the company witnessed a 30% surge in revenue (adjusted for the divestiture of its logistics arm).

Another key aspect of why I think high of Shopify is its brand recognition and social media dominance. For example, Shopify has been blowing up on the internet, fueled and helped by Dropshipping or E-Commerce gurus that teach the art of online sales on social media platforms. Shopify is widely acknowledged and known as the best platform to sell online; what we like is it’s natural, unfiltered, organic brand development and reviews, in which the popularity of the brand spreads through the word of mouth from a person rather than from digital advertisements.

Of particular interest to long-term investors, Shopify attained a free cash flow margin of 21% in the last quarter, indicating its ability to convert a significant portion of sales revenue into free cash flow. We anticipate further improvement in this margin as Shopify continues to expand its gross merchandise volume (GMV) and net revenue. Already, Shopify is displaying signs of emerging as a cash-generating powerhouse, with free cash flow reaching $905 million over the past 12 months.

Investors must be ready to withstand short-term fluctuations in these stocks. Presently, Shopify’s valuation stands at 77 times the forward one-year earnings, which may appear steep initially. However, this valuation becomes more reasonable when factoring in consensus analyst forecasts indicating the company’s net earnings are expected to more than double from 2024 to 2026.

The transitional phases for companies, shifting from break-even to high-profit states, often pose challenges for investors as they weigh the importance of revenue growth versus profitability in their valuation assessments. I am confident that Shopify is poised to significantly increase its worth over the next five years and beyond.

Thank you for reading my article. I am Jiayi Chen, a stock trader at Tradebase. (If the link tells you to download WhatsApp, click on the compass icon on the bottom right)

I put my heart and soul into everything I write and publish for free. I’ve been struggling to maintain my studies and grades at near-perfect scores and my 5 social media blogs with articles. If you enjoyed this article, I would ask you to kindly take 20 seconds out of your life to click here to join my official trading channel where I broadcast my top stock recommendations and newsletters for FREE. It means a lot to me. If you don’t want to join then I am completely ok since everyone likes different things and you might not like what I write or disagree with my stock picks. But anyways, I appreciate you for reading my article and I wish you the best on your investment journey and your quest to financial freedom.

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