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When Shopify Inc . became the largest company listed on the Toronto Stock Exchange last year, edging past Royal Bank of Canada, the question of whether the e-commerce company would be able to maintain its powerful momentum gained some urgency.

More than 13 months later, investors have an answer: Shopify’s momentum is alive and well, even as the stock’s sky-high valuation remains a pressing concern.

The interest in Shopify’s position at the top of the S&P/TSX Composite Index – in terms of the value of its outstanding shares, or market capitalization – rests on a list of former superstars that faltered soon after reaching the No. 1 spot over the past two decades.

Nortel Networks Inc., Barrick Gold Corp., Potash Corp. of Saskatchewan Inc. (now Nutrien Ltd.), Research In Motion Ltd. (now BlackBerry Ltd.) and Valeant Pharmaceuticals International Inc. (now Bausch Health Cos. Inc.) all reached the top of the benchmark.

But investors who bet on further glory met disappointment, leaving the impression that RBC is Canada’s natural stock market leader and usurpers are cursed.

If so, Shopify appears determined to break the curse.

The company gives merchants – typically small and mid-sized companies – the tools to sell online through their own branded sites, which is a key difference to Inc.’s approach, where third-party retailers sell under the Amazon banner.

Despite its success, Shopify hasn’t stood still like Research In Motion, whose BlackBerry wireless devices were rendered obsolete by Apple Inc.’s slick iPhones. Nor has it pursued a questionable string of expensive acquisitions, which ensnared Nortel and Valeant.

Instead, Shopify has deepened its reach into e-commerce with features that help merchants with inventory, order fulfilment and cash advances.

The numbers reflect the company’s remarkable success in attracting merchants to its platform.

First-quarter revenue soared 110 per cent, year over year, to US$988.6-million. That’s a sharp acceleration from 47-per-cent revenue growth in the first quarter of 2020.

The number of merchants on the Shopify platform increased to 1.7 million by the fourth quarter of 2020 (the latest available figure), up 70 per cent since the fourth quarter of 2019.

And market capitalization has gained more than 70 per cent since the stock first zoomed past RBC in May, 2020. Shopify is valued at $207.8-billion today, or nearly $26-billion more than RBC.

It’s hard to see any curse here. So should investors ditch the comparisons to Research In Motion, Valeant and other supernovas?

Despite its enormous size, Shopify appears to have plenty of runway for further growth. According to CIBC World Markets analyst Todd Coupland, the available global market is 50 million small and mid-sized businesses, meaning that Shopify, so far, has captured only a 3.4-per-cent slice.

The business model, which gives merchants full control of their own brands, also remains attractive, especially as Amazon faces antitrust cases and a backlash over employee working conditions.

However, Shopify is facing challenges.

A big one: Just as the pandemic pushed merchants online, the end of the pandemic threatens to slow the trend as consumers reaquaint themselves with the joys of in-person shopping.

Shopify said recently that it had seen no retreat from online shopping so far in Australia and New Zealand, where stores reopened earlier than much of the rest of the world, which bodes well. And Mr. Coupland expects that Shopify can grow at three times the pace of e-commerce growth over the next two years.

Still, the end of the pandemic could mean that e-commerce is no longer a matter of life and death for merchants, turning blistering growth for Shopify into something less spectacular.

An even bigger challenge: justifying Shopify’s valuation.

The stock trades at more than 300 times analysts’ consensus earnings expectations for the current fiscal year and 48 times reported sales (more than 10 times Amazon’s price-to-sales ratio) – a very high valuation that suggests investors have already priced in an incredible future for the company. Clearly, Shopify can’t slip up.

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