Tech Stock Up 160% in 12 Months for Taking Canada’s Cannabis Industry Online

Canadian cannabis companies are investing millions to develop e-commerce stores that will eventually help them sell billions in cannabis products in Canada and all across the world.

However, developing and managing a global e-commerce platform isn’t exactly the easiest thing to do. It has taken Amazon more than 20 years to develop into a world-class e-commerce company.

To solve this problem, the Canadian cannabis industry is turning to one of the hottest technology companies of 2019.

  • Shares of this e-commerce giant are up more than 100% in 2019.
  • #1 provider of e-commerce tools to the Canadian cannabis industry.
  • The company is set to keep growing for years.
  • After a recent pullback, shares are oversold on the chart.

Shopify (NYSE:SHOP) is one of the fastest-growing e-commerce companies in the world. Its e-commerce platform makes it easy for small and large businesses to launch and manage online stores.

Shopify is already carrying billion-dollar brands such as Tesla, Oreo Cookies, Red Bull, and Kylie Cosmetics – Kylie Jenner’s cosmetics line that is currently being valued at $1 billion after launching on Shopify in 2015.

As you can see, Shopify is the real deal.

Today, Shopify is applying its expertise to the Canadian cannabis industry. It has emerged as the #1 e-commerce platform for high-growth cannabis companies looking to move product online.

Canada’s largest companies and provinces are using the Shopify e-commerce platform to power their online businesses.

Ontario Selects Shopify’s E-commerce Platform for Online Cannabis Sales

Back in early February, as the Canadian cannabis industry was preparing for legalization, Ontario chose Shopify’s online store software for its online and mobile cannabis sales platform.

This was a big win for Shopify. It gave the company an early lead in Canada’s high-growth cannabis industry and Shopify became the exclusive provider of online cannabis sales in Ontario –  one of the most promising cannabis markets in Canada.

The partnership was a hit – according to Bloomberg, “The Ontario Cannabis Store, for example, saw 1.3 million unique visits in the first 24 hours and received approximately 100,000 orders.”

Shopify Has Partnered with the Biggest Cannabis Companies in the Industry

Shopify has landed an impressive roster of cannabis clients. That roster includes Canopy Growth Corp (CGC), the largest cannabis company in the world who now use the Shopify platform to power its online sales.

Shopify is up more than 160% in the Last 12 Months

Shopify has been on a roll on the chart. Shares are up 160% in the last twelve months.

More recently, Shopify shares saw a pullback from the 52-week high after announcing plans to build fulfillment centers. I view this recent blast of weakness as a great opportunity to buy an industry leader at a solid discount to the 52-week high.

The relative strength index shows that Shopify is the second most oversold level it has been in the last 12 months.

Shopify Is An Expensive Stock

After posting some big gains in the last few years, Shopify trades with a high valuation. Its P/S ratio of 40 is 20 times the S&P 500. That high valuation shows that investors have high expectations for Shopify.

Moving forward I expect Shopify to deliver consistent sales and earnings growth. But I think this is the kind of stock that can take a hit if sales growth falls short of expectations on a quarterly report.

Shopify Is Not a Pure Play Cannabis Stock – but It Does Offer Cannabis Exposure

Shopify isn’t a pure-play cannabis stock. The company generates most of its revenue outside of the cannabis industry.

However, Shopify is the early industry leader helping Canada’s cannabis industry sell cannabis online. I believe this revenue line will grow, and I expect it to make a meaningful contribution to sales and earnings.

Looking Forward – What Should We Expect?

Shopify is a broad play on e-commerce and a niche play on e-commerce in the cannabis sector. Shares have been on fire the last year but recently pulled back from the 52-week high. This looks like an opportunity for investors who have been waiting to buy shares on a pullback.

Michael Vodicka owns shares Canopy Growth Corp (CGC).

About the Author

Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.