Is Shopify (SHOP) Stock the Right Buy in E-Commerce Now? – Investorplace.comeCommerce
These days, I have hardly any brick-and-mortar retailers in my portfolio. The big money comes when you invest early, and those days are long gone for the “big box” stores. Sales are moving online, around the world, at an exponential pace. Five years ago, e-commerce was a $1.3 trillion market; by next year, it’ll be triple the size. And Shopify (NYSE:SHOP) stock has benefitted hugely from this.
Shopify is growing fast. Just four years out from its IPO, SHOP is surpassing eBay (NASDAQ:EBAY) as the #2 U.S. e-commerce company (despite being based in Canada). It’s about to reach 1 million merchants on its platform.
Yet SHOP stock still hasn’t regained momentum since August’s sell-off. This is leaving some folks scratching their heads. After all, the Q2 earnings report was good, in that Shopify easily beat analyst expectations. That includes both revenues, which were up 48% year-over-year, and earnings. SHOP delivered $0.14 earnings per share (while Wall Street had only expected $0.02 per share).
But of the two metrics, I’m much more interested in the revenue trend with this kind of company. That’s where you see the growth.
And that being the case, sales are how you properly value a high-growth company. So, for , I always like to check the price-to-sales (P/S) ratio. Here’s what we see with SHOP stock:
At its late August peak, SHOP stock reached a price-to-sales ratio of nearly 30.0. That may have just been too much for many investors at a time when market sentiment was going south.
Now, this P/S of about 25.0 or even 30.0 is pretty normal for a growth stock.
But one of SHOP’s peers is actually showing a ridiculously low P/S right now. And this one operates in the largest e-commerce market in the world. So, in my view, that’s more worth paying attention to right now.
I’m talking about the “Shopify of China,” Baozun (NASDAQ:BZUN).
Baozun’s claim to fame is that it helps many Western brands compete in China’s enormous e-commerce market. This so-called “cross border” e-commerce is becoming a big deal in China. People there are seeing skyscrapers pop up overnight. Their standard of living has grown astronomically, and so has their demand for Western luxuries from Oakley and Ray-Ban to Burberry, Coach, and Armani.
BZUN stock is powered by revenue growth that’s just as solid as its Canadian counterpart: In the second quarter, Baozun’s revenue jumped 47% from a year ago to $248.2 million. And its earnings are even better than SHOP’s, at $0.21 per share.
That was a nice beat, and Wall Street is already expecting explosive growth for BZUN going forward. Earnings are forecast to increase from $1.15 per share this year to $1.81 in 2020 and up to $2.46 by 2021. As for revenues, analysts expect $1.4 billion in 2020 and $1.7 billion by 2021.
Yet all year, BZUN stock has been easing along at just 3.0, even 2.0 for its forward P/S ratio. Remember how that compares to SHOP stock:
When you’ve got a stock like BZUN, where the growth prospects are huge but the stock is under-the-radar and still-cheap… that’s when it becomes a compelling buy.
Like I said, it’s all about investing early in a trend.
And to that end…
Besides individual e-commerce plays, I think you definitely have to consider the bigger trend that will drive ALL tech companies’ futures. And that’s 5G.
The 5G Chip Stock That Will Spark a $53 Trillion Revolution
When you hear the term 5G, it just sounds like one step up from what we have now in 4G. But we’re not talking about slightly faster internet speeds. We’re talking about an advance that’s so large, it’ll allow for “the next technological revolution,” as the MIT Technological Review puts it.
And it’s creating a technology “arm’s race” around the world. China is already on pace to spend over $400 billion on developing its 5G infrastructure. That’s why the Trump administration has made the deployment of 5G a top national priority.
4G was an improvement. 5G is a game changer.
Once you’re up to speed on , you’ll want to invest in one specific company. It’s one of the best in the world at what it does, and .
The company has over 10,000 patents and has been named a Top 100 Global Innovator for seven consecutive years. Its success has led to long-term partnerships and exclusive deals with the likes of Samsung and Oracle (NYSE:ORCL).
Even the 5G cell service from Verizon (NYSE:VZ) and AT&T (NYSE:T) will depend on this company’s chips. Everything, and I mean EVERYTHING, connected to the internet via 5G will either directly or indirectly use the same type of chip this company makes.
It’s also a well-established company that’s been around since the 1990s. Not only did it survive the dot-com crash, it went from a $2 billion market cap then… to a $17 billion market cap today. And thanks to its 5G advantage, it’s just getting started.
I think this stock is the single best (and easiest) way to capture the full upswing of 5G wireless.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), and +1,044% in Tesla (TSLA), just to name a few. .
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