If you had invested in Shopify (NYSE: SHOP), a fast-growing e-commerce software-as-a-service (Saas) company, in May 2015 at an IPO price of US$17, you have made 54x your money!
Talk about a multi-bagger!
However, Shopify has been unprofitable all these while.
In 2015, it had a net loss of around US$19 million, and that has widened to US$125 million in 2019.
Shopify isn’t the only tech company showing this phenomenon.
DocuSign (NASDAQ: DOCU) is another company that comes to my mind.
In fact, there are stories abound of unprofitable SaaS companies that are making fortunes for investors. Especially after the stock market crash in March this year.
How we do reconcile this?
Traditionally, what we have learnt is that we have to look out for profitable companies that have the potential to grow over the long-term.
But even those companies that are not making money are growing their share prices.
How is that even possible?...