Profit from the E-Commerce Battle — No Matter Who Wins

Michael Robinson

Friday, November 11, 2022

Whenever there’s a major battle between two tech leaders, our goal is simple: profit — no matter who wins.

Last month, I cited the dogfight between auto company Tesla Inc. (TSLA) and a major Chinese car brand. And then I recommended investing in a company that supplies computer chips to the entire auto industry.

A similar battle is shaping up in e-commerce, a global sector that market research firm Imarc Group values at thirteen trillion dollars.

You see, Amazon.com Inc. (AMZN) has held the pole position here for years. Insider Intelligence reports Amazon’s share of U.S. online sales hit fifty-six percent last year.

So it’s no wonder that search engine giant Alphabet Inc. (GOOG) is working hard to challenge Amazon’s dominance. It’s aiming to turn its twenty-four billion product listings into its own online sales juggernaut.

That’s why, today, I’d like to introduce an e-commerce-fulfillment company that can help investors like us cash in on this fight, regardless of the victor.

Google’s Key Partnership

Amazon’s been building its impressive network of warehouses and delivery vans for years. Meanwhile, Google’s late to the party.

That’s why it partnered with a smaller e-commerce company that recently closed a two-billion-dollar acquisition of a fulfillment business. This puts Google’s partner in a position to offer two-day shipping across the U.S., just like Amazon.

The company I’m talking about is Shopify Inc. (SHOP), a cloud-based provider of web and mobile storefronts for e-commerce businesses — everything from mom-and-pop startups to national chains.

Shopify enables anyone to quickly create a beautiful, easy-to-use electronic storefront. It can then hook it up to payment systems like Stripe, and have it manage things like orders, billing, delivery systems, and physical retail locations.

The platform can also connect with other storefronts, so businesses can list their products on their own website as well as on Amazon, Walmart Inc. (WMT), and Pinterest Inc. (PINS). It even enables businesses to see all their sales channels and customers — the kind of sophisticated business analysis that only huge corporations can ordinarily afford.

All these features are available for as low as twenty-nine dollars per month. No wonder more than one million merchants across 175 countries use it.

Shopify’s Monster Growth

In 2017, Shopify-powered storefronts sold more than twenty-six billion dollars’ worth of product. In 2021, that figure surpassed $175 billion.

The number of shoppers using a Shopify storefront skyrocketed from fifty-seven million in 2015 to 597 million in 2021.

This company’s initial success came from how easy it enabled new businesses to integrate with Amazon. It’s a big reason the company, now sixteen years old, boasts a market cap of more than thirty-nine billion dollars.

But this longtime Amazon vendor is now starting to work with Google. In May, Shopify acquired delivery company Deliverr for around two billion dollars, allowing it to fully integrate shipping and fulfillment into its suite of offerings.

Now Shopify is working closely with Google and its YouTube division, enabling businesses to list and deliver their products through these platforms directly, without giving Amazon a cut.

While Amazon’s delivery infrastructure is formidable, keep in mind that Deliverr is a tried-and-true fulfillment company. It’s offered two-day delivery for Walmart vendors for years.

Shopify’s acquisition of Deliverr, and its partnership with Google, is a big move against Amazon’s dominance in the e-commerce space…

Especially factoring in Shopify’s 2019 acquisition of 6 River Systems, a warehouse robotics company. This deal will soon enable Shopify to speed up sorting and shipping from its newly-acquired Deliverr warehouses.

Plenty of Upside Here

So, how does Shopify shape up as an investment?

When Covid sent company revenues soaring eighty-six percent in 2020, and fifty-seven percent in 2021, Founder and CEO Tobi Lütke made a judgment call.

He figured the pandemic would light a fire under e-commerce. He thought the sector would capture five or even ten years of growth at once.

“We knew that if there was a chance [this growth would take place], we would have to expand the company to match,” he said.

But things turned out differently than expected: Shopify’s growth headed back toward pre-pandemic levels. As Lütke says, “It's now clear that bet didn't pay off.”

But this misstep has a silver lining. The company’s slower, pre-Covid growth rate leaves plenty of room for upside.

Consider, if Shopify achieves just one-fourth of its three-year earnings growth rate, we could still see per-share profits double in just a little more than two years.

Wall Street, meanwhile, sees this as an oversold stock. Since Shopify hit bottom on October 11, it’s risen more than twenty percent, more than three times the S&P’s return over the same period.

Bottom line: Shopify is a unique investment — a beaten-down stock whose turnaround plan is already helping it crush the overall market.

Whether Amazon or Google wins the e-commerce battle, Shopify is the kind of investment where we can cash in on an unstoppable trend at a discount, and build wealth over the long haul.

And in this week's Trend Trader Pro "Trade of the Week," I share a speculative way to potentially multiply any profits quickly. So don't miss out!

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Sincerely,
Michael Robinson
Michael Robinson

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