It's been a great year for online businesses as people have been spending their money on the Internet rather than in-store. It's been common for retailers to report strong online sales while in-store numbers may have been underwhelming. E-commerce giant Shopify (TSX:SHOP)(NYSE:SHOP) has benefitted from those trends as well, seeing sales in its most recent quarter of $767 million U.S. nearly doubling the $391 million U.S. it generated in the prior-year period.
The strong growth numbers have propelled the stock to returns of around 190% this year, far outpacing the S&P 500 and its 15% gains thus far. At a share price of $1,500 on the TSX, the next big milestone for the stock would be the $2,000 mark. It's possible that with another strong showing in 2021, shares of Shopify could reach that high. To rise that much in value would mean just a 33% increase from where it is right now.
A 33% gain for Shopify is pretty modest, given that in 2019 its share price jumped 174% and in 2018 it rose by 49%.
The biggest obstacle is undoubtedly its price tag, as the stock trades at more than 50 times its revenue and 21 times its book value. For Shopify to continue rising and climbing in value its sales numbers would need to continue building of this year's results. However, as things in the economy potentially start going back to normal, there could be a dip in Shopify's sales in 2021. That's why despite the stock's strong performances in recent years, next year could be one where Shopify's share price starts to falter.
