We recently published a list of 12 Most Profitable Growth Stocks To Invest In. In this article, we are going to take a look at where Shopify Inc. (NYSE:SHOP) stands against other most profitable growth stocks to invest in.
After the September inflation report, the market did feel a slight bit of panic but it seems to be fading away. After the report, the market expectations for a rate cut shifted, with 79.9% of participants predicting a cut to 450-475 basis points, while 20.1% expect the rates to remain unchanged. It was a change from 32.1% expecting a 50 bps rate cut and 67.9% anticipating a 25 bps cut at the beginning of the month as mentioned in our 8 Most Profitable Blue Chip Stocks to Invest in article.
However, on October 11, the CME FedWatch tool showed that 89.5% of the market now expects a 25 bps rate cut and the rest expect it to remain the same.
Market Corrections Ahead but No Bear Market in Sight
Christian Mueller-Glissmann from Goldman Sachs joined CNBC’s ‘Squawk Box’ to discuss the latest market trends. He believes that the stock market pullback in August could be a warning of more potential corrections, but he does not see a severe bear market ahead. His overall outlook is positive due to a healthy macroeconomic environment, where growth remains stable, inflation is under control, and central banks are starting to reduce rates. These factors create a favorable setting for equities and other risk assets.
He pointed out that while bullish market positioning contributed to August’s setback, the combination of declining inflation and rate cuts allows central banks to cushion against financial shocks, minimizing the risk of a deep downturn.
Mueller-Glissmann highlighted two key reasons for not expecting a major market decline: inflation has significantly dropped, giving central banks more flexibility, and price momentum over the past 6-12 months suggests a strong macroeconomic backdrop. With the labor market improving, he sees no signs of an economic downturn.
His strategy focuses on quality growth stocks that are temporarily undervalued and cyclical value stocks that could recover as the market stabilizes. Regarding inflation, he noted a shift from inflation relief to growth as the main market driver, raising concerns about inflation resurfacing if growth strengthens. However, he remains confident that inflation will stay anchored, and disinflation will continue into the year’s end.
Our Methodology
For this article, we used stock screeners to identify nearly 25 growth stocks above the market cap of $10 billion with a 5-year revenue compound annual growth rate (CAGR) of 30% or above. Next, we narrowed our list to 12 stocks with the highest TTM net income. We also mentioned the hedge fund sentiment around each stock, which was taken from Insider Monkey’s Q2 database of 912 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An enthusiastic customer completing a purchase and receiving an order confirmation via one of the companies online sales channels.
Shopify Inc. (NYSE:SHOP)
5-Year Revenue CAGR: 43.04%
TTM Net Income: $1.273 billion
Number of Hedge Fund Holders: 56
Sixth on our list of most profitable growth stocks is Shopify Inc. (NYSE:SHOP), a global commerce company that provides essential tools for businesses to start, scale, and run efficiently. Its platform supports multiple sales channels, including online storefronts, social media, and physical locations, allowing merchants to manage all aspects of their business through a single dashboard.
Its cloud-based infrastructure provides data insights for informed decision-making while ensuring security and privacy. The platform also emphasizes brand ownership, mobile commerce, and global reach, with features like localized storefronts and simplified cross-border sales. its scalable infrastructure supports merchants of all sizes, offering enterprise-level functionality without requiring re-platforming.
One of Shopify’s (NYSE:SHOP) growth prospects is its lending program, Shopify Capital, which has provided $5.1 billion in loans to merchants. This program offers loans based on merchant revenue, challenging traditional banks and venture funds by addressing small and medium-sized businesses often overlooked by conventional lenders.
With APRs ranging from 32% to 45%, the loans generate significant revenue and profit for Shopify (NYSE:SHOP). By selling these loans as securities, it can reinvest in other areas, or it can retain the loans for high returns, both fueling further growth. This profitable lending model enhances the company’s appeal as an investment.
Overall, SHOP ranks 6th on our list of most profitable growth stocks to invest in. While we acknowledge the potential of SHOP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SHOP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
