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Stock Watch

Shopify share price tops our 3 growth stocks to watch in April

The digital sector is growing. In the UK alone, it’s now worth a whopping £130 billion according to government figures, far outpacing the wider British economy.

Take the growth of digital marketing platform providers. Last year over $100 billion was spent on these platforms as digital marketers used them to deliver online advertising campaigns. Globally, digital marketing software is set to be worth $74.96 billion by 2022. But with so many digital companies touting for investment, which are the ones that could break out?

$74.96bn

Value of the digital marketing software market by 2022

 

Shopify [SHOP]

Online merchant platform Shopify is now looking to grow by moving into bricks and mortar stores through Shopify Retail. To execute this ambitious plan, the Canadian company has brought onboard Ian Black, former head of UberEATS North America. The idea is to use Black’s experience of how to shift goods both on and offline to grow the new venture. 

Poaching Black shows that Shopify is putting some serious heft behind the initiative. The company recently announced upgrades to payment services and a return policy suitable for online and offline purchases.

But Shopify is facing some emerging competition in the form of Facebook-backed Instagram Checkout, which does away with the need for merchants to use Shopify to sell goods on the social media platform. When RBC analyst Ross MacMillan pointed this out, Shopify’s stock dropped almost 4%.Shopify 1-year share price performance, CMC Markets, as at 29 March 2019

 

Yet, shares are up 69% since the low at the end of December, and up over 54% since this time last year. Shopify will no doubt hope that Black's knowledge and the shift in strategy will see the gains continue.

The next big milestone for Shopify is their 2019 first quarter results in early May. Zacks Consensus Estimates project net sales of $308.80 million for the quarter, up 44.07% from the same quarter last year. 

For the full-year, expectations are for EPS to come in at $0.44, up a healthy 15.79% on the previous year, while revenue is expected to be rise 37.85%.

 

Workday [WDAY]

Workday's cloud based HR software might not be the most glamorous of products, but it's in demand.

40% of the Fortune 500 use Workday to help employees book holidays, complete performance reviews and other office admin.

Last month’s full year results saw subscription revenue up 37.5% to $673.5 million. Even better news was a subscription revenue backlog that was up 30.1% to $6.7 billion.

 

Market cap$42.81bn
Forward P/E87.25
EPS (TTM)-1.93
Profit margin-14.82%

Workday stock vitals, Yahoo finance, as at 29 March 2019

 

Off the back of these stellar numbers, Workday now expects subscription revenue of over $3 billion for 2020 – a huge 28% year-on-year growth.

Workday's stock has gained 45% over the last 12 months, outpacing the S&P 500's more modest 8.1% gain. Like much of the market, the stock saw some losses at the beginning of March, but has since clawed these back. Analysts now see plenty of upside, with the consensus being an 8.7% gain in 2019.

 

The Trade Desk [TTD]

The Trade Desk lets online marketeers send personalised messages to potential customers. While personalisation is a hot button topic in the wake of privacy concerns, the sector is big business.

The digital advertising market has doubled in the last 5 years, with total ad spend in Europe approaching $50 billion. As the market has grown, so have the companies supplying the advertising platforms. Since Trade Desk's 2016 IPO the stock has gained an impressive 612%.Trade Desk 1-year share price performance, CMC Markets, as at 29 March 2019

 

2018 saw the company’s share price rocket from a lowly $50 at the start of the year to a high of $150 in September. Although this was pushed back by the broader tech selloff at the back end of last year. Still the stock is currently up 288.42% year on year.

Investment website Simply Wall St predicts earnings to grow at 19% annually, which would see EPS grow from the current $2.08 to $2.47in 2022.

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