We're Up Big On This Pick -- And We're Holding For More

Jimmy Butts's picture

Tuesday, July 9, 2019 - 2:30pm

by Jimmy Butts

Earlier this month, my colleague Brad Briggs gave a few details on how our system works over at Maximum Profit, my premium newsletter advisory service. If you read that article, then you know that our system seemingly flies in the face of what we are told "works" when it comes to investing. 

To prove the doubters wrong, we gave a few examples of gains we've made in the past. Today, I want to tell you about a pick my subscribers and I are profiting from right now, thanks to the system. 
In fact, we're up about 64% in a little over four months...

We're Up Big, But My System Still Says This Stock Is A 'Buy'
SHOP logoIf you're looking to start an online business, then Shopify (NYSE: SHOP) can make it easy for you. The company's cloud-based, multi-channel commerce platform allows small and medium-sized businesses to easily set up an online storefront with retail functionality.

Shopify builds websites for businesses to attract customers, process orders, ship products, collect credit-card payments, and track and manage inventory. It also enables sales from other channels like physical storefronts, smartphones and tablets, as well as social media sites like Facebook and Pinterest. Its software gives merchants a single view of their business and customers across all of these channels in one integrated product.

One other neat feature that Shopify has built out is its Exchange marketplace. This is where you can buy and sell Shopify businesses. So, if you're interested in venturing into the e-commerce world, check out the various businesses for sale at Exchangemarketplace.com. You can browse through small websites that are selling for a few hundred bucks to more established businesses selling for thousands.

Shopify's goal is simple: make e-commerce easy and affordable for everyone, from start-ups to large, multibillion-dollar businesses. More than 610,000 merchants from 175 countries use its platform. Some of its larger customers include Procter & Gamble (NYSE: PG), Tesla (Nasdaq: TSLA), UPS (NYSE: UPS), Red Bull and the Los Angeles Lakers basketball team.

One of the beauties of Shopify's software is that it's cloud-based. That means customers don't need to buy any hardware to run it, and they don't even have to install software since the software is in the cloud – stored on and accessed via Shopify's remote servers.

This cloud-based model makes its services easy and affordable. There are no upfront hardware and software costs. To begin using Shopify, a customer needs only to pay a monthly fee starting at $29 a month for its basic package, which will get you up and running in no time. For more advanced features and scaling your business, its Cadillac service runs $299 a month.

Outside of the monthly subscriptions, Shopify's other main source of revenue is derived from its merchant solutions. These are fees earned from merchants based on their customer orders processed through Shopify Payments. In other words, it takes a small cut of every transaction placed on a merchant's website.

In 2018, the company witnessed revenue growth of 59%, generating more than $1 billion in sales. Over the last three years, the compounded annual growth rate for Shopify's total revenue has been an astonishing 74%.

This is a company that's in hyper-growth mode, and all the focus is on top-line growth. As such, Shopify hasn't turned a profit yet. It's on track to be profitable this year, but its focus has been on investing back into the business to support growth. 

Even though the company has posted accounting losses, it's managed to generate positive cash flow profits over the last four years. That's impressive. Shopify's balance sheet is pristine. It has more than $1.9 billion in cash on hand and zero debt. The company is in strong financial shape.

SHOP chart

Action to Take
If you're thinking about buying, then you should know that shares of Shopify are quite volatile (50% more volatile than the overall market). Looking at its chart, you can see that it's seen some violent swings over the last few months. Keep this in mind when determining a position size.

That said, the stock has been on fire as of late, and Maximum Profit subscribers have been enjoying the run. We are up 64% since adding it to the portfolio about four months ago. To put that into perspective, the S&P 500 has only delivered a 4.7% return over the same period.

The good news is that the stock still sports a Maximum Profit score of 98 -- one of the highest scores our system has shown in quite some time. So if you missed the ride, there's still time to get on board. However, if the momentum stalls, the system has a good track record of telling us exactly when to sell.

Jimmy Butts does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.