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Is Shopify the Next Hot Marijuana Stock?

Rick Munarriz, The Motley Fool
Updated

Shopify (NYSE: SHOP) got its start a dozen years ago when Ottawa-based entrepreneur Tobias Lutke wanted a better platform to sell snowboards, but now the dot-com darling may be cashing in on bigger highs than just snowy mountaintops. Sales through some of the e-commerce platform's storefronts have been buzzing since Wednesday's legalization of marijuana for recreational use in Canada.

Several Canadian provinces -- including Ontario's official government site, which will be that region's only legal way to buy recreational cannabis until next year -- are turning to Shopify to power their online stores. Private-party retailers are also leaning on Shopify to cash in on the opportunity, and it's drumming up a spike in activity for the platform operator that cashes in on digital rent as well as a piece of the transaction action.

Shopify running on a smartphone and laptop.
Shopify running on a smartphone and laptop.

Image source: Shopify.

Green Wednesday

Shopify Plus executive Loren Padelford was tweeting out the platform's success hours into Wednesday's anxiously anticipated Canadian legalization. He would go on to tell BNN Bloomberg that Shopify wasn't having a problem handling the spike in activity. Visitor and order volumes weren't as high as Black Friday, but naturally things were a lot busier than the typical shopping day in Canada, with more than a hundred orders pouring in per minute. Green Wednesday, anyone?

Shopify wasn't having any problem growing before Wednesday's traffic-popping development. The platform has come a long way since Lutke put his coding skills to the test by developing a seamless e-commerce platform from scratch. There are now more than 600,000 merchants with Shopify-fueled online stores, and growth is booming.

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Revenue soared 61.5% in Shopify's latest quarter, and that's actually decelerating from the pace it was running at in previous quarters. It was targeting top-line growth to slow to a 48% to 50% clip for the third quarter that ended last month. It will be interesting to see how its fourth-quarter guidance plays out in light of Wednesday's uptick in shopping activity in its home country. Shopify reports fresh quarterly results next week.

Speculators that have been hopping on and off volatile marijuana stocks won't find the same kind of bandwagon play here. Shopify shares are volatile, but not that prone to the wild ups and downs that we've seen in some of the cannabis plays. However, this is clearly a company benefiting from this week's Canadian legalization of marijuana for recreational use. We'll find out soon if it's helping accelerate Shopify's top-line growth.

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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Shopify. The Motley Fool has a disclosure policy.