These three companies are relatively large and should be somewhat stable due to the size of the market caps. They offer the potential for market-beating returns over the next few years, and all operate in growing industries with excellent management teams. Let’s dive in.
Shopify (NYSE: SHOP) is a global e-commerce company and has returned roughly 4,000% since going public in 2015. It is emerging as a competitor to Amazon as opposition mounts due to its anti-competitive practices. Shopify allows merchants to set up digital stores and currently powers more than 1 million businesses in over 175 countries.
Founder and visionary CEO Tobias Lütke is at the helm, and a founder-led company is one of the key points to look out for. Lütke owns roughly 6.7% of Shopify’s stock, and this insider ownership is also an encouraging sign for investors due to his wealth being attached to the stock.
Shopify continues to execute and reported another outstanding quarter in Q3. Revenue increased 96% year-over-year in Q3 of 2020 to $767.4 million. Gross merchandise volume (GMV) grew by 109% YoY. Shopify is also profitable and reported a net income of $191.1 million in Q3 versus a loss of $72.8 million a year prior.
Shopify saw a record number of paid subscribers in the quarter and management stated that the digital shift brought on by COVID-19 and is likely to endure. These tailwinds have contributed to the incredible growth of Shopify. Overall e-commerce sales have surged during the pandemic. However, there is still a large runway for growth as it still represents a minority of total retail sales.
The Trade Desk
The Trade Desk is one of the largest independent ad tech companies and has a data-driven approach. In the past, digital advertising has gone through the “walled gardens” such as Google and Facebook, but in recent years this has changed. The Trade desk is a neutral alternative and will benefit from this shift.
In Q3 of 2020, The Trade reported revenue growth of 32% YoY to $216 million. This is a return to growth from the negative 12% contraction in revenue in Q2 of this year due to COVID-19. The Trade Desk, unlike many other high growth companies, is also profitable and reported a net income of $62.7 million in Q3.
Despite the headwinds due to COVID-19, companies are being more deliberate and increasing spend on the platform, which has fueled revenue growth. In a survey of over 200 advertisers, 85% said they were under pressure from CFO’s to justify market spending. The Trade Desk’s programmatic advertising allows its customers to do this, which in turn drives growth. CEO Jeff Green stated that The Trade Desk gained more market share in Q3 than any other quarter ever while maintaining a retention rate of 95%.
Despite the rapid growth over the last few years, there is still upside potential. Connected TV is another area that has seen massive growth-up over 100% YOY, and we are in the early stages of the cord-cutting revolution. A business firing on all cylinders and a visionary founder, the future looks brighter than ever for The Trade Desk.
MercadoLibre is the e-commerce leader in Latin America and also operates a payments division MercadoPago. MercadoLibre has faced stiff competition from Amazon and other competitors but has managed to cement its place as the e-commerce platform of choice in Latin America.
Latin America has a population of roughly 605 million, a large youth demographic, and a growing middle class which is likely to act as catalysts for growth over the coming years. E-commerce penetration levels across Latin America remain in the single digits, and there is a huge runway for growth. COVID-19 has accelerated the adoption of e-commerce in the region. The number of unique users on its platform has nearly doubled from a year ago to 76.1 million in Q3, and GMV increased by 62% YoY to $5.9 billion.
The payments division continues to grow rapidly with a total-payment-volume (TPV) of $14.5 billion, up 92% on a currency-neutral basis. Although this was introduced to complement the e-commerce offering, it has grown to be a substantial part of the business. It now serves over 60 million payers, rising by 7.5 million in the last quarter.
In Q3 total revenue soared by 85% on a currency-neutral basis and reported a gross profit of $480 million. Despite political tensions in the region, MercadoLibre continues to prosper and reward shareholders and is an excellent option to add international exposure to your portfolio.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Contributing Writer at MyWallSt
Colm's favorite stock is Virgin Galactic as it is representative of his visions for our world in the future.