The E-Commerce Empire
The annual summer online shopping bonanza has commenced.
Even two weeks ago there was a record $11 billion haul in just 48 hours.
No wonder so many investors are still interested in Amazon.com (AMZN), which recently concluded its Prime Day shopping experience.
Don’t get me wrong, I’m in no way easing my bullish belief in Amazon.
After all, the stock has been up 350% over the past five years.
Sure, it’s an impressive track record, but it pales in comparison to a backend e-commerce play that actually drives much of Amazon’s business.
Had you bought that stock instead, you’d have made more than 12 times as much money-enough to turn $25,000 into $1.2 million.
Now you understand why I always tell tech investors to take the long view. Tech is the prime sector to make millions out of pennies.
Today, in the first of two parts, I’m going to show you why this Amazon key supplier could double earnings twice more in three years…
Amazon’s Hidden Supercharger
Amazon is Amazon. It’s a great way that folks can buy all manner of goods, from stereos and TVs to paper plates and diapers without leaving their homes, which was perfect during the Covid shutdowns.
There is no indication of this popularity shifting back any time soon.
Data compiled by Statista notes that online sales will rise by 58% from the base year of 2017 through 2023. They’ll have risen from $468 billion to $740 billion.
But remember, those numbers were B.C. – before Covid.
Ironically, what most investors don’t know is how vital a role a company I call “Amazon’s Hidden Supercharger” plays in the King of E-commerce’s success.
As powerful as Amazon is, it can’t handle the millions of transactions it conducts each day all on its own.
That’s why it quietly launched a program several years ago that lets third-party vendors sell their products on Amazon’s website. It was a very savvy move that has really paid off.
In roughly 13 years, the percentage of third-party sellers has more than doubled. It was just 26% back in 2007. But in this year’s first quarter, that figure came in at 55%.
Now you know why Shopify Inc. (SHOP) has been on a roll for several years.
Shopify provides “e-tailers” with sophisticated software that allows them to plug into Amazon, manage orders, collect payments, and send out emails to buyers.
I’ll be giving you more details about the company’s great operations in an upcoming chat.
A Tale of Two Returns
Simply stated, it proves what I have been saying for some time now – the road to wealth is paved with tech.
High tech is the one place in the U.S. where investors can regularly find a handful of stocks that can turn them into millionaires in a relatively short time frame.
I believe SHOP provides us with a great case study in just what I’m talking about.
The stock only began trading just over six years ago, on May 26, 2015 to be exact.
As is often true with new stocks hitting the market, trading was choppy for the first six months. And then Wall Street soured on the firm, sending shares to a post-IPO low on Feb. 8, 2016 when it closed at $19.33.
That provided one of the all-time great tech comeback stories as the stock began its historic run in the Spring of 2016.
For our purposes, the time frame actually works out very well.
Over the past five years, Amazon is up roughly 370.5%. That’s more than 3x the growth of the benchmark S+P 500, which was a respectable 102% for that same time period.
By investing in a broad market ETF, you would have turned $25,000 into a little more than $50,000. That same amount invested in Amazon would have yielded you $117,500.
It goes without saying that Amazon smoked the market, but it just can’t compare with the returns made by Shopify investors.
Over the past five years, SHOP has gained roughly 4,675%. A stake of just $25,000 invested in SHOP over the period would be worth nearly $1.2 million.
Shopify accomplished all of this with a fraction of the brand awareness.
Don’t let those returns scare you off this great tech leader. Believe me, I see plenty of upside.
Indeed, in my next chat about Shopify, I’ll show you why it could double twice more in the next three years or so.
You’re really going to want to see how that original $25,000 could have turned into $4.7 million in less than a decade.
Cheers and good investing,
Michael A. Robinson