Shopify (NASDAQ: SHOP) has been a massive winner over the last decade, delivering a mind-blowing 3,664% return (as of writing) since going public in 2015.

While long-term investors have benefited enormously from this rise, potential investors wonder if Shopify is a worthy stock to add to their portfolio today.

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This article aims to explore the opportunities and risks associated with owning the stock over the next few years, helping investors make an informed decision.

Image source: Getty Images.

Bull case:

Shopify has been an unusual company, as it competes against Amazon in the competitive e-commerce industry, yet has remained hugely successful over the last decade -- the secret lies in Shopify's unique business model.

As a start, Shopify is a software-as-a-service company focusing on enabling merchants to sell their products anywhere and everywhere. So the idea is that with the tools that Shopify offers, any seller can quickly set up an online store to sell their products globally, or employ the company's hardware-software solution (such as POS system) to sell in a brick-and-mortar store, or do both concurrently (omnichannel). In other words, Shopify aims to be the preferred partner for merchants, benefiting only when they are successful.

Shopify's fee structure further amplifies its focus on merchant success. With a monthly subscription fee of $29 for its basic plan, a new merchant can open an online store with plenty of softer tools at their disposal to make their first sale. Beyond that, Shopify takes a transaction fee ranging from 0.2% to 2% for each successful sale, aligning its interest with the seller's success.

This win-win arrangement helps explain Shopify's sustainable growth over the years. When merchants become successful using Shopify, new sellers get motivated to start their entrepreneurial journey using Shopify's platform. Besides, successful merchants contribute more revenue to Shopify and are also likely to become loyal customers.

And that brings up another key point to highlight about Shopify, namely its recurring revenue nature. For the year ending Dec. 31, 2024, the tech company had $178 million in monthly recurring revenue, or $2.1 billion annually, from its monthly subscription fees.

This revenue is extremely sticky and likely to continue growing over time. The rest of Shopify's revenue is correlated with its gross merchandise value (GMV), which is also recurring, provided that it continues to help merchants sell more products over time. For perspective, GMV grew by 26% in 2024, demonstrating the company's continued growth momentum.

Shopify's solid business model makes the company extremely attractive to investors, especially considering the vast growth opportunities ahead, both locally (in online and offline retail) and internationally. If the company can remain focused on delighting its users, it is likely to attract and retain more successful sellers over time.

Bear case:

While there is plenty to like about Shopify, investors must also consider the downside risk of owning the stock.

One thing to note is that as Shopify continues to grow in size, it may struggle to sustain its historically high growth rates, even though it is likely to continue growing at respectable rates.

For instance, Shopify experienced explosive growth during the pandemic as online sales penetration skyrocketed. However, that tailwind has faded, creating some challenges for the company during the later-pandemic period. The silver lining is that Shopify has expanded beyond its online roots to offer omnichannel solutions for merchants, allowing it to continue growing its total retail market share through its brick-and-mortar solutions.

Besides, as Shopify scales, it will inevitably gain more attention from giants like Amazon, which will try to fend off the younger player from taking market share. With enormous resources (financial, human talent, and technology), Amazon could pose a threat to Shopify's ongoing expansion.

For example, Amazon could offer a more comprehensive set of tools (including logistics, cloud computing, and AI solutions, as well as advertising) to attract key Shopify merchants to its marketplace.

Beyond competition risk, Shopify is increasingly facing macro risks, especially now that it has sellers globally. The recent tariff war has become increasingly burdensome for small and medium-sized sellers to conduct business, which could lead to either lower sales volumes or even the outright closure of their businesses.

If merchants suffer, Shopify will feel the pain since its revenue is closely tied to merchants' success.

It doesn't help that Shopify's stock trades at a significant premium, posing substantial rerating risks if the company fails to meet investors' expectations. As of the time of writing, Shopify's stock trades at a price-to-earnings (P/E) ratio of 110, a high figure by any standard.

What it means for investors

Shopify has a solid track record of execution and growth, leveraging its business model and customer-obsessed culture. These advantages strategically position it to sustain its growth momentum.

Still, investors should not expect a smooth ride, as the tech company must fend off competitors while navigating turbulent macroeconomic situations, such as tariffs. And with the stock trading at premium levels, buying the stock today is not for the faint-hearted.

Only those with a long time horizon (more than five years) and a strong conviction should consider buying the stock.

Should you invest $1,000 in Shopify right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Shopify. The Motley Fool has a disclosure policy.

Dutch Bros (NYSE: BROS) has quickly become one of the most exciting names in the food and beverage industry. While more prominent players like Starbucks dominate the market, Dutch Bros has carved out its niche with a unique drive-thru model and an intensely loyal customer base.

But what makes Dutch Bros a stock to watch for the long run? Here are three key reasons this fast-growing coffee chain is worth investors' attention.

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Image source: Getty Images.

1. A well-proven operating model

Dutch Bros isn't just another coffee company -- it has revolutionized the drive-thru coffee experience. Unlike traditional sit-down cafes, Dutch Bros focuses on speed, efficiency, and customer experience, allowing it to serve more customers per hour. Such an approach delights customers and also generates a good return on investment for the company.

Besides, the coffee chain is well known for its customizable drinks, particularly its cold and ice-blended beverages. Personalized beverages align with younger consumers' preferences and differentiate them from competitors. In 2024, cold beverages accounted for 94% of all drinks sold to Generation Z. The company has also moved beyond its early roots of serving coffee-based beverages to other products such as energy drinks and refreshments.

Beyond serving great beverages fast, the food company also focuses on building a loyal customer base. It relies on strategies like excellent customer service, community building via social media, and a loyalty system to reward customers. As a result, 71% of its transactions in the fourth quarter of 2024 went through the loyalty program, up from 44% in the first quarter of 2021.

Its highly efficient operating structure, differentiated product offerings, and loyal customer base explain its solid track record of growth. In the last five years, store count grew by 42% on a compound annual growth rate (CAGR), and revenue expanded by 50%.

2. Great store economics

While many restaurant chains struggle with high overhead costs and long capital payback periods, Dutch Bros stores deliver strong financial performance with an efficient cost structure and fast profitability.

Let's look at some quick numbers. The company expects to spend $1.25 million on capex for each new store in the future, with an expected annual sale of $1.8 million per new store in the second year of operation. With a targeted shop contribution of 30%, the return on investment is around 43%, giving it a payback of just slightly above two years. Note: Shop contribution is defined as gross profit plus depreciation.

Dutch Bros' solid return on investment is not without reason. One thing is that, unlike traditional coffee shops, Dutch Bros stores are smaller and require fewer employees, which keeps operating expenses lower. A low capex and relatively low overhead allow the company to generate strong store-level margins early on.

Besides, the beverage company has a proven track record of delivering same-store sales growth (SSSG) over time. For perspective, stores opened in 2020 and prior delivered 4.6% SSSG in 2024, and newer stores did even better, reaching 13.7% for those stores opened in 2023. SSSG will further enhance the return on investment in older stores.

These factors should sustain Dutch Bros' excellent store economics for the foreseeable future.

3. A great growth story

Dutch Bros has already proven its business model and store economics. The focus is on scaling up and expanding the business into new markets and products.

The company currently has just under 1,000 stores across 18 states. Over time, it expects to add another 3,500 stores in existing states and also expand into other new regions, particularly on the East Coast. In 2025 alone, it plans to add at least 160 stores in existing and new areas. If successful, this latest expansion will quadruple the store count in the coming years.

However, that's just one part of the story. It is actively adding new SKUs to its menu to grow SSSG, particularly focusing on food products. For perspective, Dutch Bros' food sales in 2024 are less than 2% of revenue, much lower than its industry peer, where food accounts for around a quarter of the sales. Expanding its food menu presents a major opportunity for increasing same-store sales.

Another area that could see good growth is the energy drinks segment, which is expected to grow faster than the coffee industry. With around 25 % of its sales from customized energy drinks, Dutch Bros is well positioned to benefit from this trend.

Overall, the food company expects to grow its top line by 20% in the coming years, with new stores growing at a mid-teens growth rate and SSSG in the low digits.

A growth stock to keep on the radar

It is not difficult to see why Dutch Bros could be a great growth stock. It has a proven operating model, solid store economics, and a long growth runway.

Unsurprisingly, the stock doesn't come cheap -- as of writing, it has a price-to-earnings (PE) ratio of 179.

It will be best to keep the stock on the radar and wait for a more reasonable entry price.

Should you invest $1,000 in Dutch Bros right now?

Before you buy stock in Dutch Bros, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Dutch Bros wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $495,226!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $679,900!*

Now, it’s worth noting Stock Advisor’s total average return is 796% — a market-crushing outperformance compared to 155% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 10, 2025

Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.