In this article, we will discuss 5 Crypto Stocks for 2022. If you want to read our detailed analysis of the crypto industry, you can go directly to 10 Crypto Stocks for 2022.
5. Shopify Inc. (NYSE:SHOP)
Number of Hedge Funds: 73
Shopify Inc. (NYSE:SHOP) has allowed merchants on its platform to accept payments in cryptocurrencies for their goods and services. The Ottawa, Canada-based entity provides online merchant services to 1.75 million retailers globally. Shopify Inc.’s (NYSE:SHOP) focus on cryptocurrency payment processing has increased following the integration of CoinPayments earlier in 2021 to boost the e-commerce experience of customers globally. Cryptocurrency acts as a secure payment method due to the strong controls and stability embedded in blockchain technology. Furthermore, the transaction fee is only 0.5%.
Shopify Inc. (NYSE:SHOP) expects the adoption of cryptocurrency to increase conversions and bring a greater customer in-flow in the form of cryptocurrency users. In August 2021, Binance, the biggest cryptocurrency exchange in the world, allowed its users to make payments through cryptocurrency on Shopify Inc. (NYSE:SHOP) due to a partnership with crypto-fiat gateway Alchemy Pay. This partnership enables users to make payments in more than 40 cryptocurrencies.
In its Q2 2021 investor letter, Worm Capital LLC discussed its stance on Shopify Inc. (NYSE:SHOP). Here’s what the firm had to say about the company:
“In particular, the very nature of travel is changing: Longer stays, more flexible remote work policies, and so on. As its marketplace matures, we see significant similarities to our position in Shopify: An international focus led by managers who understand that, in land-grab environment, focusing on its unique value proposition for its sellers—i.e. keep costs low, improve the platform with additional features, etc.—takes precedent over short-term earnings. In other words, we like businesses that play the long game. Unlike Airbnb, Shopify drove positive attribution this past quarter. Still, we think this opportunity is still vastly undervalued over the long-term.
Last year, in the Q2 2020 Investor Letter, we wrote a bit about the similarities and differences between AMZN and SHOP, but concluded they “both display winner-take-most dynamics in their respective domains.” We still believe that thesis is true: E-commerce is still, relatively speaking, in its early days. Despite the pandemic push, e-commerce retail still represents less than 15% of overall retail sales, per latest Fed data.
What that means, in practice, is that the opportunity for low-end disruption (i.e. create a scalable backbone for sellers to launch e-commerce business cheaply) is an enormous, underappreciated opportunity to create new economic value. Shopify is growing its GMV at high velocity (114% YoY in its most recent quarter to over $37 billion) but it’s a tricky business to value—which is good. We like tricky valuations. Our research process looks out several years into the future, which is really the only way to value a business properly—especially in a disruptive environment. (Trying to look at potential short-term earnings or even a simple price-to-sales multiple is not a good way to model out valuations on Shopify.) When thinking about a position like Shopify, we view them as generational company—much like AMZN—that is building the global infrastructure to enable small and medium-sized business to transact online, and, most importantly, keep their unique identity and branding.
Where AMZN optimizes for efficiency, SHOP optimizes for experience. The scale of this opportunity is vast, and Shopify’s reach is wide. The focus—much like ABNB—is keeping costs low for sellers, attract new vendors, improving the ecosystem for merchants. “The rebels are winning,” Shopify president Harley Finkelstein said recently (in a quote we liked so much we made it the title of this letter). “We are betting on a different vision of the future of commerce. We are making it possible for every business to present their brand in their own unique way. A stark contrast to selling on a centralized marketplace.”
