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Is Shopify the Right Buy in E-Commerce Now?

By Matt McCallOct 16, 2019


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 (SHOP) has benefitted hugely from this.

Shopify is growing fast. Just four years out from its IPO, the company is surpassing eBay (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 Shopify still hasn’t regained momentum since August’s sell-off. This is leaving some folks scratching their heads. After all, the second-quarter earnings report was good, in that Shopify easily beat analyst expectations. That includes both revenue, which was up 48% year-over-year, and earnings. The company 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 Investment Opportunities, I always like to check the price-to-sales (P/S) ratio. Here’s what we see with Shopify’s stock:

At its late August peak, SHOP reached a price-to-sales ratio of nearly 30. 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 or even 30 is pretty normal for a growth stock.

But one of Shopify’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 (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.

Baozun’s stock is powered by revenue growth that’s just as solid as its Canadian counterpart: In the second quarter, revenue jumped 47% from a year ago to $248.2 million. And its earnings are even better than Shopify’s, at $0.21 per share.

That was a nice beat, and Wall Street is already expecting explosive growth for Baozun 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, the stock has been easing along at just 3, even 2 for its forward P/S ratio. Remember how that compares to SHOP:

When you’ve got a company like Baozun, where the growth prospects are huge but its 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 the full scope of the opportunity in 5G stocks, you’ll want to invest in one specific company. It’s one of the best in the world at what it does, and I bet you’ve never heard of it.

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 (ORCL).

Even the 5G cell service from Verizon (VZ) and AT&T (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 $16 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. Click here to claim your access to my newest investment report, The 5G Chip Stock That Will Spark a $53 Trillion Revolution.

P.S. Every tech insider and analyst at my firm is excited about this once-in-a-lifetime opportunity in 5G.

Here’s my prediction: If you invest in 5G today, it could be the only investment you’ll ever need to make.

Like getting in on Amazon (AMZN), which showed early investors could have made a massive 102,000% gain. Or Netflix (NFLX), in which a $500 investment would have you sitting on $123,000 today.

I explain fully what’s at stake, and the enormous profit potential of 5G, in my latest free briefing. You can access it here.

Matt McCall’s MoneyLine Podcast

Click here to listen to Matt McCall’s MoneyLine podcast! This week, Matt sits down with fellow InvestorPlace employee, Dave Maxwell, to discuss the fundamentals of investing for retirement. They touch on topics that range from how to use your 401K to when debt is actually good for your budget.

You can subscribe to this podcast on iTunes, Stitcher, Spotify, or wherever you listen to podcasts.

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