Shares of Shopify (NYSE:SHOP) have fallen 40% so far in 2022 after management said growth would be slower than in 2021. The announcement came in conjunction with macro concerns regarding rising interest rates and the fallout from the war in Ukraine, which likely exacerbated the Shopify stock sell-off.

If you invest for the longer term, a sell-off like this is a buying opportunity.

Revenue is growing fast

Shopify’s annual revenue has grown at a fast rate since going public in 2015. The e-commerce platform revenue has grown more than 4,000% over the past 12 months.

How did the e-commerce and payment platform grow so quickly? Riding the trend of direct-to-consumer (DTC) online sellers worldwide. Shopify’s business model is to offer subscriptions for businesses and individuals to easily create a website and start selling things online. It also has an app marketplace, where other companies can offer services to its e-commerce merchants, and it has its own payment service called Shopify Payments.

Shopify is estimated to have 1.75 million merchants on its platform, from large enterprises to small individual sellers. Of these merchants, it generated $1.3 billion in subscription revenue and $3.3 billion in merchant solutions in 2021. Merchant solutions have been the main driver of growth, with revenue up 442% since 2018. 

The tech company processed $175.4 billion in gross merchandise volume (GMV) last year. Of that amount, $85.8 billion was gross payment volume (GPV), meaning sales were processed with Shopify Payments.

Shopify is growing its market share

In 2021, global e-commerce sales were estimated at $4.9 trillion. Comparing this figure to Shopify’s annual GMV, the platform holds around 3.6% market share worldwide.

Shopify has a lot of competition from online marketplaces like Amazon and eBay. However, only a few other major competitors have copied Shopify’s model as the core software that powers other DTC e-commerce websites. These include website builders like BigCommerce, Wix, and Squarespace, all of which have decent e-commerce tools. But Shopify is still the leader, as it has grown its revenue faster than these three competitors.

The long-term thesis behind Shopify is the belief in e-commerce. The global market could be worth up to $6 trillion by 2024. When it comes to U.S. e-commerce, Shopify has been the number two player for several years now, but it continues to grow. The company has increased its market share in e-commerce by growing its GMV faster than the industry.