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Shopify's (NYSE: SHOP) business today is booming as much as it was during the lock-down phases of the pandemic -- and Wall Street has noticed. The commerce platform's stock soared 48% through November 2024, nearly doubling the year-to-date rally in the S&P 500.

There's time for that 2024 performance gap to expand further as fresh data about transaction processing volumes over the holiday season comes out. However, Shopify's stock looks even better from a long-term perspective. Let's look at why this could be the investment to put in your portfolio in December.

Market share

Shopify is winning market share in the global e-commerce market, a massive niche with much more room to expand. That division recently crossed 16% of the total retailing industry, matching its high from the pandemic following a nearly two-year decline since late 2020.

E-commerce as a percentage of all retail. Data source: Federal Reserve.

Shopify has made the most of the 2024 demand rebound, with sales volumes growing by over 20% year-over-year in each of the last five quarters. Overall revenue, meanwhile, was up 26% last quarter thanks to tailwinds like higher transaction and subscription fees. Those subscription charges are especially attractive since they promote customer loyalty and boost profit margins. "Q3 was outstanding, further establishing Shopify as a leader in powering commerce anywhere, anytime," CEO Harley Finkelstein said in a mid-November press release.

Sparkling finances

Shopify is following the successful example of many other tech giants. For example, tech giant Apple (NASDAQ: AAPL) is pushing into the services side of the tech business, which is attractive for reasons such as a steady stream of recurring revenue and higher profit margin compared to hardware sales.

You can see how Shopify's services segment is already boosting these important metrics. Monthly recurring revenue is "most closely correlated with the long-term value of our merchant relationships," management said in its quarterly filings, and that figure was up a healthy 28% in Q3. It's no surprise, then, that cash flow and profit margin rates both rose. Shopify has even returned to the all-time high operating profit margin that it set in the early phases of the pandemic.

Productive uses of capital

There's no shortage of areas that management can profitably direct all this excess cash toward over the next several years. The list includes adding extra services like payment processing and marketing, plus deeply integrating artificial intelligence into every part of the platform. Success in these areas will draw more merchants, keep them engaged for longer, and allow for higher transaction fees over time.

None of this is to say that Shopify stock is a screaming deal right now. Shares are trading at their highest price since early 2022, not far from the $150 level that marked the pandemic-era record high.

There's also a real risk of slowing growth results erasing a lot of those recent stock price gains, given the broad market rally over the past two years. If you're comfortable with those risks, though, Shopify seems like a great long-term holding into 2025 and beyond. Watch as it captures more of the e-commerce business and handles more transactions in its popular point-of-sale system over the next decade. Combined with a move toward profit margins of nearly 20%, that success could easily power stock returns that put rival tech companies to shame.

Shopify, in early 2025, will likely update investors on just how well its holiday shopping season went following a strong 2023-2024 result. However, investors don't have to wait until that clarity is achieved before establishing at least a small position in this attractive growth stock.

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Demitri Kalogeropoulos has positions in Apple and Shopify. The Motley Fool has positions in and recommends Apple and Shopify. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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