Unlocking Enduring Value: Why Microsoft and Shopify Stand Out as Long-Term Investments

Investors often ponder the viability of investing in companies whose stock prices have already seen substantial appreciation. This sentiment is particularly relevant when considering tech leaders like Microsoft and Shopify, both of which have experienced significant gains this year. Microsoft's stock has risen 20% since January, while Shopify has climbed an impressive 27%. Despite these strong performances, a deeper look reveals that these companies still offer considerable upside potential, embodying characteristics of what one might call 'forever stocks'.

Microsoft's stellar performance is underpinned by its diverse and thriving business segments. In the fourth quarter of its fiscal year 2025, ending June 30, the company reported a robust 18% year-over-year revenue increase, reaching $76.4 billion. Earnings per share also saw a significant boost, climbing 24% to $3.65. A major catalyst for this growth is Microsoft's cloud division, particularly Azure, which saw its revenue from cloud services accelerate to 39% growth, compared to 30% in the prior year. This rapid expansion in cloud computing, coupled with its burgeoning artificial intelligence endeavors, has become a primary driver of Microsoft's success, surpassing its traditional operating system business. The company's substantial contracted revenue of $368 billion, a 37% year-over-year increase, further solidifies its future growth prospects. Moreover, Microsoft's strong brand, high switching costs for customers, and consistent dividend payments, despite a modest forward yield of 0.7%, make it an appealing long-term investment, supported by its healthy cash flow and conservative payout ratio.

Shopify, after facing a downturn post-2021, has engineered a remarkable comeback since 2023 through strategic business adjustments. These changes included price increases, the first in over a decade, and divesting from its costly logistics operations. These decisive actions have led to a resurgence in revenue growth, improved margins, and consistent profitability. In the second quarter, Shopify's revenue surged 31% year-over-year to $2.7 billion, and its net income dramatically improved to $906 million, a significant leap from $171 million in the same period last year. The company's free cash flow also saw a healthy increase of 26.7%, reaching $422 million, maintaining a steady 16% free cash flow margin. Shopify's strong position in the expanding e-commerce market, its user-friendly platform that empowers merchants, and its growing customer base, which now commands over 12% of the U.S. e-commerce market by gross merchandise volume, ensure sustained demand for its services. The company benefits from a formidable moat, built on switching costs and powerful network effects, aiming for a century of operation. For investors seeking long-term growth, Shopify presents a compelling case as an excellent perpetual stock.

In conclusion, the sustained growth and inherent strengths of Microsoft and Shopify underscore their potential as valuable, long-term additions to any investment portfolio. Both companies exemplify how innovation, strategic adaptation, and a focus on core competencies can lead to enduring success. Their resilience, forward-thinking business models, and commitment to delivering shareholder value highlight a positive trajectory that aligns with the principles of progress and prosperity in the dynamic landscape of global commerce and technology.