It's not Facebook.
Hi all, Gerrit De Vynck from Bloomberg’s outpost in Canada here.
Pop quiz: What’s the best-performing U.S.-listed tech company with a $1 billion-plus market cap in the past year?
It’s not Facebook, which hit 2 billion users recently, or Amazon, which booked more than $1 billion in revenue during its one-day Prime sale last month. It’s not even Jack Dorsey’s Square, which has made a comeback of late, almost tripling its share price in the last year as it expands internationally and broadens its product line.
The title belongs to Shopify, that e-commerce company from north of the wall you may or may not have heard about yet. Based (along with Justin Trudeau) in Canada’s capital of Ottawa, Shopify has returned more than 500 percent to investors since going public on the New York Stock Exchange in May 2015. It’s done that by blowing past analysts’ revenue estimates —not to mention its own forecasts— for each of the nine quarters it’s reported since then. At one point, analysts even asked Shopify’s CFO on a conference call if he was purposefully under-estimating the company’s ability to grow. Shopify sees revenue growing 67 percent in 2017 to around $650 million, though, let’s be honest, it’ll probably increase that prediction again next quarter.
Even CEO Tobi Lutke seems surprised by his own success.
“People are selling billions of dollars worth a month now on the platform —which is crazy,” he said in an interview on Tuesday after second-quarter results sent the stock up another 13 percent to a new record. “This has been working incredibly well.”
Shopify isn’t a marketplace like EBay, Jet.com or Amazon. Instead, it tries to make selling online as easy as possible for small merchants by setting them up with websites, payments and shipping tools, helping them integrate with Amazon and EBay, and giving them cash advances to grow their own businesses. It’s started chasing bigger customers, winning larger enterprises from privately-held Magento. It hit 500,000 users this quarter, a 67 percent increase from the same time last year.
“I have lots of stories about being laughed out of VC offices because they told me the entire addressable market for my company was 40,000 stores,” Lutke said.
That kind of unexpected growth is key to Shopify’s thesis. In Lutke’s mind, millions of people all around the world have the guts and brains to become entrepreneurs, but don’t have the tools. If Shopify can get more of those budding entrepreneurs set up with their own stores and then help them grow, it’s anyone’s guess how big it could get. The company has already nurtured an entire community of “dropshippers” —people who buy goods on the cheap, sell them online and ship them to consumers without ever holding the inventory themselves.
It’s still early days for the company, and keeping up growth is hard. Lutke admits the law of large numbers is “bound to apply” to Shopify and start weighing on growth rates. Still, it’s clear that Shopify is a stand-out with a lot of potential, with the ability to grow rapidly without needing massive sales teams. It even made a short list of companies Alphabet was mulling trying to acquire, Recode reported last year. For all those reasons, this company is one to watch, even if it is from boring, friendly Canada.
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