The concept of “the cross-price elasticity of demand,” may sound like something just for econ nerds, but I assure you that it’s very profitable for you as well.

And my own experience earning an honors economics degree and serving as a college teaching assistant in the subject can make it pretty painless too.

Simply stated, cross-price elasticity of demand means that, if whiskey is expensive relative to beer, more people will buy the latter.

But what if there was a hidden way to get the equivalent of whiskey at beer prices?

I don’t know about you but I’m on board with that.

Just take a look at Amazon.com Inc. (AMZN).

The King of Ecommerce trades at about $3,130 a share.

But there is another leader in the same space whose stock costs less than one-third of AMZN even though its earnings are growing 10% faster.

Let me show you why this market crusher could double again in less than two years…

The Third-Party Connection

Now then, as the holiday shopping season gets underway, the conventional wisdom on Wall Street would be to buy Amazon and leave it at that.

But we’re not about following the herd. I’ve racked up more than 200 double or triple-digit wins in recent years in no small measure by going against the grain.

That’s how I came across the stock we’re talking about today. Turns out, it’s actually been a big part of Amazon’s success.

See, nowadays Amazon relies on hundreds of other companies to sell thousands of items through the e-commerce giant’s own unbeatable storefront.

This has been crucial to Amazon’s success because, on its own, it would have taken Amazon years to set up that diverse a product range.

And the importance of these “third-party” sellers to Amazon’s success is growing and has more than doubled in about 13 years.

Back in 2007, just 26% of Amazon’s sales came from third-party sellers. In the third quarter, that number was at 54%.

These are usually smaller businesses, sometimes run out of someone’s kitchen or garage. They don’t have a dedicated IT team to figure out how to connect to Amazon’s storefront and handle sales there.

That’s where the stock we’re talking about today comes in. This firm provides retailers with sophisticated, cloud-based software that plugs them into Amazon, handling everything from managing orders and collecting revenue, to sending out emails to buyers.

The firm can also help businesses build their own online sites, handle sales whether they’re coming in through Amazon, their own website, or elsewhere.

It even lets retailers tap into social media. Every part of the platform is keyed into ramping up sales by giving the retailer’s buyers a great shopping experience.

During this year’s COVID pandemic, this has been more important than ever.

Amid lockdowns and virus fears, in-person buying has plunged as consumers have flocked to shopping online.

Businesses large and small have had to adjust. And without today’s stock, that would have been impossible for many.

The Hidden Supercharger

The company enabling all this is Shopify Inc. (SHOP). Its cloud-based platform supports Web and mobile storefronts, physical retail locations, as well as social media storefronts, and marketplaces.

And apart from plugging in retailers into Amazon’s storefront, Shopify also lets companies connect to Walmart Inc. (WMT), Pinterest Inc. (PINS), Facebook Inc. (FB), Twitter Inc. (TWTR), and most recently, ultra-popular video-sharing site TikTok.

On Shopify’s platform, merchants get a single view of their business and customers across all these different sales channels. This includes the kind of sophisticated business intelligence and analysis that only large corporations could once afford.

Shopify’s platform is so popular that more than 1 million merchants across 175 countries now use it.

Amazon.com may be the most prominent part of online retail to consumers.

But behind the scenes, Shopify is what makes the e-commerce revolution work for smaller merchants.

And it’s growing fast. In 2012, Shopify had a mere $23 million in sales. But last year, that figure had soared to nearly $1.6 billion, an amazing increase of more than 6,900%.

In the last few years, Shopify has smartly focused on capturing more of the e-commerce value chain. The firm has been building out its own payment network as well as the Shopify Fulfillment Network.

Last year, Shopify acquired warehouse robot company 6 River Systems and deployed the robots in partner warehouses to speed up sorting and shipping.

Mind you, that purchase cost $450 million. Right now, Shopify is sitting on $6 billion in cash, and is looking for another acquisition.

A bolt-on purchase that expands Shopify’s logistics network or payment systems is likely and would increase its margins even more.

Meanwhile, the firm’s third-quarter earnings were a massive beat. The volume of merchandise Shopify handled more than doubled to $30.9 billion, compared to last year. Wall Street was only expecting $27.46 billion.

And that’s after the same number had already more than doubled in the second quarter.

But not only is Shopify growing fast, it’s growing faster than Amazon. In fact, with a stunning rate of 101% a year, Shopify has been growing per-share profits at 10% more than Amazon,

At that rate, Shopify’s per-share profits are doubling every nine months.

To be conservative, cut that in half and you still have a double in less than 18 months.

As you can see, Shopify is a fast-growing tech stock and a great way to hitch your portfolio to the unstoppable rise of e-commerce.

And, on top of that, it’s a great example of how the best way to play a market-defining trend isn’t always by buying the most obvious sector-defining firm.

Cheers and good investing,

— Michael A. Robinson

Source: Strategic Tech Investor