Shopify (NYSE: SHOP) continues to move higher on news of yet another paradigm-shifting partnership with Chipotle Mexican Grill (NYSE: CMG). The two companies are partnering to create a virtual farmer’s market. On June 30, Shopify announced that it would help create virtual storefronts for chain suppliers of Chipotle restaurants.
For its part, Chipotle is using this partnership as an “on brand” way to help its partners work through the unprecedented economic difficulties caused by the novel coronavirus and ensuing pandemic. To that end, Chipotle is covering its suppliers’ costs for the storefronts for the first two years. Initially, the company will cover Niman Ranch, Petaluma Creamery, McKaskle Family Farm, and Meister Cheese.
“It can be intimidating for may family farms to change the way they do business, so we’re giving our suppliers the right tools and resources to successfully launch improved eCommerce platforms,” said Chris Brandt, CMO at Chipotle. Brandt went on to comment how the suppliers in this partnership fit the company’s Food with Integrity values.
Shopify Continues to Stack Up the Victories
In June, SHOP shares had leaped higher on the announcement of a deal with. Walmart (NYSE: WMT). This partnership created the Walmart Marketplace, an online venue that Walmart estimates will allow up to 1,200 sellers to list their products on Walmart.com.
Shopify Should Be Gaining Customers
The pandemic has accelerated the growth of e-commerce. According to Shopify COO Harley Finkelstein, the shift to online commerce during the pandemic was fast: “The retail world that would have existed in the year 2030 has been pulled into 2020. Brick and mortar retailers that were thinking of moving online have done so at an incredible clip over the last 8-10 weeks.”
This means that with or without the lockdown measures caused by the global pandemic, Shopify will continue to add customers as more retailers look to create an online presence.
E-Commerce Is Thriving on Convenience Not Fear
If there was any doubt that e-commerce is the future of retail, you just need to look at what’s happened during the Covid-19 pandemic. As poorly as most stores performed, the companies that had a strong e-commerce presence before the pandemic were able to post “less bad” numbers. And while some people are focusing on the fear that the pandemic is generating, I think the case of retail is expanding on an opportunity.
Consumers have been trending towards experiences for several years. And shopping doesn’t make the list. At the very least, it seems that shopping is not an experience they want to share with friends. My daughters (21 and 14) would rather shop online. They simply have no desire to go to a mall or shop with friends.
If you don’t believe me, then follow the money. Simon Property Group, one of the major real estate investment trusts (REITs) specializing in mall properties is cutting its dividend. It may not happen today. In fact, many investors have lost money trying to call the “beginning of the end” for brick-and-mortar retail. But I believe you can confidently say the pandemic marks the “end of the beginning.”
My point is not to say that there is no market for brick-and-mortar shopping. There always will be. But the pandemic isn’t creating the e-commerce revolution. It was already happening. And now that many of the late adopters have been integrated into this ecosystem, Shopify will be relevant for a long time.
But What About Amazon?
Of course, when you start talking about e-commerce, you have to talk about the gorilla in the room. Amazon (NASDAQ: AMZN) is the unquestioned leader in the e-commerce space. And with its Amazon Web Services (AWS) platform, it has a seamless way of moving vendors into their universe. Walmart is currently number three in the e-commerce space. So by teaming up with Shopify, it’s clear that the company has Amazon clearly in its sights.
SHOP’s Technicals Are Still in Place
Looking back on an article by my MarketBeat colleague Thomas Hughes, the technicals for SHOP stock still appear to be in place. At the time, Hughes was citing Shopify’s partnership with Walmart as a catalyst for the stock. The company’s new partnership with Chipotle is yet another reason to believe the stock can still move higher.
The Bottom Line on SHOP Stock
The argument for Shopify comes down to this. Retailers need an online presence to be relevant. Shopify makes these e-commerce sites, and they are the best at doing that. But it’s not just a case of “if you build it they will come.” Shopify provides retailers with tools for success. This means that Shopify will only become more relevant in years to come. And that means that, despite having yet to turn a full-year profit, Shopify is a buy for the economy of today, and more importantly the economy of tomorrow.
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