Prosper Junior Bakiny, The Motley Fool
5 min read
In This Article:
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A decade after its IPO, Shopify still has the qualities that allowed it to deliver significantly above average returns.
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Despite recent issues, Vertex Pharmaceuticals' innovative lineup and pipeline should lead to strong performances.
Popular themes on Wall Street today include artificial intelligence (AI), the market for weight management medicines, and the potential impact of tariffs on broader equities and the economy. In 10 years, there will probably be a different set of trending topics on The Street, but those changes won't stop the market from delivering competitive returns over the next decade.
Those who want to cash in on that can purchase exchange-traded funds (ETFs) that track the performance of some major index, or invest in individual companies that are likely to perform better than the market in the next 10 years. For those opting for the second method, two great picks are Shopify (NASDAQ: SHOP) and Vertex Pharmaceuticals (NASDAQ: VRTX).
It's been 10 years since Shopify went public. In that time, the company has crushed the market, although it's been a bit of a volatile ride. While a lot has changed since 2015, Shopify's basic investment thesis remains the same: It is a leader in its niche of the fast-growing e-commerce market and boasts a strong moat.
Let's unpack that a little more. Shopify helps merchants build and customize online storefronts.
It offers them practically everything they need to run their stores, including inventory management, payment processing, the ability to cross-sell across social media websites, and much more. At the end of 2024, Shopify commanded more than 12% of the U.S. e-commerce market by gross merchandise volume.
Shopify's competitive edge comes from at least two sources: switching costs and network effects. Since merchants spend a significant amount of time building online stores on the company's platform and doing the necessary marketing work to attract clients, they won't want to switch and risk disrupting their day-to-day operations. That means Shopify is likely to keep most of its clients.
Elsewhere, the company has an app store with thousands of options that help merchants customize their websites. The more developers seek out the company's app store for their creations, the more attractive it is to merchants.
Turning to Shopify's long-term opportunity, the e-commerce market is on a growth path since it grants merchants a far larger pool of potential consumers, and vice versa. But more than 80% of retail transactions still happen offline, even in the U.S.
