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New Shopify merchants can have a live site in a matter of hours, for as little as US$9 a month.

Christinne Muschi/Christinne Muschi/The Globe and

The rise of online retail in a world under lockdown has catapulted Shopify Inc. into the highest echelon of corporate Canada.

The Ottawa-based e-commerce company’s stock has caught fire over the past few weeks, rising by 84 per cent in just 15 trading days.

With a $107-billion market capitalization, Shopify is now the second-largest publicly traded company in the country, and is quickly closing in on Royal Bank of Canada for the top spot.

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“Investors are scrambling right now to pick post-COVID winners, and Shopify is considered to be one of them,” said Ron Shuttleworth, a partner at Toronto-based Oak Hill Financial and a veteran of the Canadian tech sector.

Living up to that potential depends on how well Shopify can withstand the pandemic’s impact on retail in general, as plunging discretionary spending threatens to set off a wave of business failures.

With hundreds of millions of people around the world under lockdown, brick-and-mortar retail is facing an existential crisis.

Luxury retailer Neiman Marcus is reportedly on the verge of bankruptcy, while Gap Inc. said this week that it may not survive the next year intact.

In Canada, credit and debit spending fell by 60 per cent in the last week of March compared with the same week last year, according to Royal Bank of Canada data.

So when Shopify suspended its financial guidance in early April, it seemed like confirmation that its business was also suffering.

Much of what Shopify merchants sell is the kind of discretionary product, like apparel, that customers tend to pull back on in an economic downturn.

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What many analysts missed in downgrading the stock, however, was the surge of businesses setting up online stores in an effort to offset severe losses in revenue.

“As retail is forced to move online to survive, Shopify is one of the only alternatives for people to do so cost-effectively,” Mr. Shuttleworth said.

About a week ago, Shopify’s chief technology officer, Jean-Michel Lemieux, alluded to a big spike in activity. “Our platform is now handling Black Friday level traffic every day! It won't be long before traffic has doubled or more,” Mr. Lemieux wrote on Twitter.

While traffic does not equate to sales, that kind of volume “clearly shows that Shopify will outperform the broader e-commerce trends,” Raymond James analyst Brian Peterson wrote in a note.

That revelation seemed to add rocket fuel to Shopify’s ascending stock, which is now more than 20-per-cent higher than its peak in January, before the pandemic shut everything down and crushed the stock market.

Rapidly shifting fortunes have made it even more difficult for investors and analysts to estimate Shopify’s fair value. If it was richly priced before all of this, the company’s valuation is now stratospheric, at more than 35-times this year’s forecasted revenue.

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“We're not sure that this is the right time for shares to be at all-time highs,” Mr. Peterson wrote.

But previous assumptions about Shopify’s rate of growth in the years ahead may now be obsolete. Countless small and medium-sized businesses are now looking to quickly evolve into e-commerce, which is exactly the segment of the market Shopify caters to.

New Shopify merchants can have a live site in a matter of hours, for as little as US$9 a month. And the company has been steadily adding new features, including a credit-card payment processor, a fulfilment network for shipping and warehousing, and a cash-advance program.

“They’re in the right place at the right time,” said Kim Bolton, president of Black Swan Dexteritas, a Toronto-based hedge fund. “Many retailers are going to be forced in Shopify’s direction.”

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