Shopify Inc. (SHOP) on Q1 2022 Results - Earnings Call Transcript
Katie Keita: Good morning, everyone. We're glad you can join us for Shopify's first quarter of 2022 conference call. We are joined this morning by Tobi Lütke, Shopify's CEO; Harley Finkelstein, Shopify's President; and Amy Shapero, our CFO. After their prepared remarks, we will open it up for your questions. We will make forward-looking statements on our call today that are based on assumptions and therefore, subject to risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements except as required by law. You can read about these assumptions, risks and uncertainties in our press release this morning, as well as in our filings with U.S. and Canadian regulators. Note that the adjusted financial measures we speak to today are non-GAAP measures, which are not a substitute for GAAP financial measures. Reconciliations between the 2 can be found in our earnings press release. And finally, we report in U.S. dollars, so all amounts discussed today are in U.S. dollars unless otherwise indicated. With that, I turn the call over to Harley. Harley Finkelstein: Good morning, everyone. For the past 2 years, we have been on an extraordinary journey with merchants, helping them sell on any and every channel as commerce shifted numerous times during the pandemic. Throughout the last 2 years, we showed up for our merchants when they needed us most, and now the trust we built with them throughout the pandemic with our platform is being rewarded with more of their business. This momentum encourages us to continue to invest for the long term. The more hard problems we solve for merchants, the more energy we add to our flywheel and the better off commerce is for everyone for years to come. As we start to put the pandemic behind us, there is yet another shift happening in commerce, and the good news is Shopify is again on the right side of that change. Beginning in February, many people, myself included, celebrated the easing of Omicron and rolling back of mandates with travel, dining out, entertainment and in-person shopping. While this new mobility moderated the explosive growth in online activity that we've seen over the last couple of years, it drove home the importance of commerce everywhere, online, in-app and in real life. Brick-and-mortar merchants learned this lesson 2 years ago when they were forced to close their doors almost overnight. Tens of thousands of physical retailers pivoted quickly and moved online using Shopify. Shopify played a mission-critical role for these businesses over the pandemic when they needed it most. And we directed all of our energy to making sure businesses could stay open when their physical presence had to immediately shut down. Everyone from mom-and-pops to merchants with large operations and considerable existing sales came fully online with Shopify, which, at the time, was the only sales channel that mattered. Now that physical retail is reopening and retail in general is rebalancing, this bigger position we've earned and the trust that we've earned with our merchants represents a huge opportunity for us. The hundreds of thousands of businesses that shifted their business to Shopify during the pandemic and stayed with us since can now take advantage of our powerful retail point-of-sale offering for a unified view of their sales online and offline. Shopify has been developing the world's best point-of-sale retail software for years, and it's now at the point where all merchants who came to Shopify during the pandemic can leverage it. No need to go back to their old, dilapidated POS systems. As we mentioned last quarter, we are growing our sales team and marketing support to help ensure that any merchant doing in-person selling on Shopify knows how much stronger the Shopify point-of-sale value proposition is relative to standalone offerings, and this is because we've done a great job building our point-of-sale channel. For example, luxury label Philipp Plein adopted our point-of-sale for multiple retail locations this past quarter as did the clothing retailer Fear of God. As point-of-sale Pro added more merchants, locations and geographies in Q1, we grew offline GMV by nearly 80% year-over-year as we continue to gain share. Even with the current resurgence in offline retail, we still believe that e-commerce will continue to grow and take share of overall retail over the long term, and we are well positioned here with our online commerce GMV posting a 51% compound annual growth rate since the start of the pandemic in Q1 2020, faster than overall e-commerce over the same period, and we took share this past quarter as well. Our overall GMV, including offline, grew even faster at a 57% compound annual growth rate since Q1 2020, demonstrating that the opportunity for Shopify is beyond just online. It's to be the commerce platform of choice in any environment and on any surface. The result of these past 2 years is that our trust battery with merchants is fully charged. To prove it, merchants are taking more of our offerings to compete in the fast-moving digital commerce landscape. A central value prop of our business model is that the platform gets more robust and more relevant to a merchant over time. Here, we showcase 3 merchants that illustrate a common theme: newer and smaller merchants get great value from a few features; as they become more established, they add more; and with increased volume, even more. FIGS, a publicly traded company built entirely on Shopify, started on our $79 plan. They grew into features, which help them scale and are still only just getting started. Merchants rely on Shopify for these needs not just because they trust us, but also because it's easier, more reliable and importantly, saves them money. And in the inflationary environment we're in now, this is especially important. By passing the economies of scale we capture down to our merchants, Shopify saves merchants money compared to what they would pay to secure each of those solutions separately, allowing them to free up capital to grow their businesses. We are training more of our sales and support teams to be able to highlight to merchants ways they can benefit from making fuller use of our platform. As a result, we believe there's an opportunity to deliver more services to merchants while saving them money. Our Merchant Solutions revenue expanded by 29%, driven by increased penetration of Shopify Payments and Capital as well as growth in revenue from our partners, helping to extend the value of our platform. Because we are on the same side of the table as our merchants, they can thrive in the platform and they do. Shopify Plus once again saw a large percentage of its merchant additions this past quarter come from upgrades, such as luxury menswear brand, Thom Sweeney; coffee house, Dogwood Coffee; and fragrance company, Ellis Brooklyn, created by New York Times beauty columnist, Bee Shapiro. These last several years have proved that serving both start-ups and large companies is not mutually exclusive, especially when you have an entire ecosystem of support from both ends of the market, and we continue to invest in both. For example, with our new link-in-bio tool, Linkpop, our unmatched capabilities for creators got even better. This is only one example of how commerce can happen anywhere. What we've seen over the past 2 years through the pandemic has been a shift of transactions to digital venues beyond the online store, where buyers are discovering goods. For years, we've invested in APIs to more easily connect our merchants with buyers across surfaces and directly transact on partner platforms, starting with Meta and Google. Orders completed on key partner services more than quadrupled year-over-year. While it's still a small percentage of the $43 billion of GMV we did in the quarter, it indicates growing momentum on this multiyear trend towards commerce everywhere. This should not be surprising. With the shifting landscape of the digital ads industry, merchants are becoming increasingly focused on finding new ways to reach buyers, and they're finding success with commerce completed directly in the app or on the search surface itself. For larger enterprises, Deloitte and Accenture are now officially partnering with Shopify on systems integrations to help some of their largest clients achieve and maintain marketing agility. We have already collaborated with the team at Deloitte Digital for Audi, World Vision and Inkbox. And as Fortune 500 companies move fast to keep their brands top of mind, we look forward to working with systems integrators to bring more of the world's best loved brands onto Shopify Plus. The energy at Shopify Plus right now is terrific as the team finished Q1 with their best month ever, closing 20% more deals in March than ever before. The variety of merchants and ways they're using Shopify Plus continued to grow with new launches in the quarter spanning well-known brands in food, footwear, art supplies, cosmetics athletic gear, tech companies and video games, including the legendary Miami beach restaurant, Joe's Stone Crab; Havaianas, Mexico; Crayola; Fiora Cosmetics; Bridgestone Cycle; TRX Training; Figma; and Call of Duty. The Internet's favorite influencer, Mr. Beast, launched his own chocolate brand on Shopify Plus this past quarter, and the NBA followed the lead of the Chicago Bulls, who launched the sale of NFTs last summer with their own All Star NFT store on Shopify in the quarter. Our track record and our momentum with merchants tell us we are on the right track, investing for the long term to solve more hard problems for them, and in doing so, energizing our flywheel. I'd like to double-click on what we mean when we talk about our flywheel as this approach differs from the zero-sum approach of a lot of other companies. Direct monetization from the customer in the short term is good. However, building something that may be less immediate and direct but will generate more value for the customer and for Shopify over the long run is much, much better. We have many examples of how we've applied the flywheel over the years from APIs to liquid to our app store and the long-term relationship we have with our community developers, an ecosystem built over a decade. None of these were very material in the short run, but over time, they strengthen every aspect of our platform. Keeping our momentum, our approach to investing for the long term is consistent with our continued investment in the Shopify Fulfillment Network. Supply chain management and fulfillment are some of the biggest challenges merchants face running their businesses. Millions of small merchants struggle to scale even once they've built a product they know buyers want. To actually get an order to a buyer, they have to fumble through a maze of freight providers, 3PLs and middle- and last-mile carriers. We know merchants trust Shopify to offer simple, reliable, cost-effective solutions to their biggest problems. That's why we're creating the world's most merchant-obsessed, end-to-end software and logistics platform, fully integrated into the Shopify ecosystem. We are simplifying logistics across every stage of a merchant supply chain, from inventory inbounding to inventory distribution across all merchant channels, to fast and affordable D2C order fulfillment and returns. Making this end-to-end supply chain easier to navigate for merchants reduces the barriers to becoming a successful entrepreneur, increases their odds of success and offers a durable source of energy to the flywheel and differentiates us even more. So today, we're announcing the acquisition of Deliverr, our largest acquisition yet to strengthen Shopify's Fulfillment Network and accelerate our path to an end-to-end merchant supply chain solution. Fulfilling more than 1 million orders per month, Deliverr's asset-light, technology-driven service is trusted by thousands of merchants across the U.S. to connect all stages of a merchant supply chain and manages distribution and fulfillment to all merchant channels. For the post-order phase of the merchant supply chain, SFN has made considerable progress towards our core offering, which includes inventory balancing, delivery promises and simple returns functionality. Our proprietary warehouse management system we've been developing is now running in our key warehouse locations and will handle all SFN order volume by the end of Q2 2022. Combining Shopify Fulfillment Network, which delivers software, talent, data and scale, provides merchants simplified inventory management and logistic services, demand-driven inventory placement that eases minimum inventory requirements and offers highly reliable, fast and affordable delivery. We are thrilled to soon welcome Deliverr's experienced team of software engineers, operations experts and merchant champions to Shopify. While adding Deliverr this year will impact profitability in 2022, it's well worth it because it accelerates our ambitions around SFN. Despite Q1 not being the easiest start to the year on the macro front, we showed an adjusted operating profit of $32 million on 22% revenue growth. This is on top of a 110% growth last year during lockdowns and boosted by stimulus. This past quarter's growth was partly driven by our Merchant Solutions revenue reaching a record high as a percentage of GMV. That means that our merchants are getting more value from our platform than ever before. It is in times like these that great companies prove themselves through a combination of strategic decisions, executed and timed right and maintaining strong operating discipline. Our merchants need to be ready for whatever the future brings because they know omnichannel is more than just online versus offline. It's commerce on social platforms, in apps, in videos and it's wherever communities and creators are connecting. The surge in digital commerce pushed transactions far beyond the online store, and they're increasingly happening in app, in social, in search and even e-mail. This larger mix of channels is what makes Shopify so valuable in any environment and across every buying surface. Building all the right tools for commerce to happen on every surface where we believe the future of commerce lives is one of our superpowers and why merchants, large and small, are building their own futures on Shopify. Amy Shapero : Thanks, Harley, and good morning, everyone. The trends Harley just talked about, how much more important omnichannel is right now, merchants making greater use of Shopify and the importance of investing now to stay ahead of the curve for merchants were clear in our financial results in Q1. But before we dig into that, I want to first speak to what we're seeing on the macro front and how it relates to what we've seen over the past 2 years because that's impacted our results in Q1. While our performance in the quarter was consistent with the guidance we provided you in February, a couple of macro factors played a larger role than expected. Before I review these factors, we reminded you in February that last year's first quarter GMV growth was 114% year-over-year as online consumer spending on goods soared, fueled by government stimulus and lockdowns. This surge was not unique to Shopify. Fast forward 12 months, our GMV growth for this year's first quarter was 16% year-over-year. The timing of Omicron easing was also a factor with mobility resuming with vigor earlier in Q1 of this year versus Q1 of last year, causing a shift in consumer spend to offline retail and travel starting in early February this year in strong contrast to a year ago, where that shift occurred in late March and into April. Another factor that impacted year-over-year GMV growth more than expected, although to a lesser extent than mobility, was inflation at a record level, pushing more consumer spend, both online and offline, toward discount retailers in Q1 of this year as consumers' wallets were stretched from higher prices, including a surge in gas prices due to the war in Ukraine. Even with these macro factors impacting year-on-year growth in the quarter, our online and offline GMV in Q1 each continued to outpace their respective markets in the U.S. In the case of offline, our retail GMV grew approximately 6x the market, underscoring our omnichannel advantage relative to online-only providers and enabling merchants to be prepared for anything. And in the context of the past 2 years, overall GMV growth of 57% compounded annually highlights just how far omnichannel has enabled independent brands to reach. Our revenue for the first quarter grew to $1.2 billion, which is 22% higher than the same period last year and represents a 2-year compound annual growth rate of 60%. In addition to the macro factors that I noted earlier that affected our year-over-year comparison, revenue for Subscription Solutions was also impacted by the app and theme revenue models for partners as well as by the change in recognition of theme's revenue from gross to net, which were not yet in place in Q1 of 2021. This change in terms and treatment for apps and themes accounted for about 2 points and 7 points of headwind to our overall revenue in Subscription Solutions revenue growth in the quarter, respectively. Subscription Solutions revenue of $344.8 million grew 8% year-over-year, reflecting the app and theme revenue change I just talked about as well as lower merchant adds in the quarter compared to Q1 a year ago. While increased mobility, along with a robust labor market, tempered our merchant adds in the quarter, monthly recurring revenue was up 17% year-over-year, benefiting from Shopify Plus and the addition of thousands more POS Pro retail locations. Merchant Solutions revenue grew to $858.9 million in Q1, up 29% compared to the same period in 2021. This was nearly twice the growth of GMV due to the increased adoption of Shopify Payments, Shopify Capital and even Shopify Markets, which has gotten off to a strong start as well as growing revenue from partners. $22 billion of GMV was processed on Shopify Payments in Q1, an increase of 27% over last year's first quarter. Payments penetration of GMV was 51% versus 46% in Q1 2021. Over the past 4 quarters, we've seen gross payments volume benefit from strong performance by merchants on Shopify Payments, an increasing percentage of which is Shopify Plus GMV; new merchant adoption both in North America and internationally; penetration gains in Shop Pay, which has facilitated $50 billion in GMV since inception; and expanded availability of our POS Pro hardware with integrated payments now being used by merchants in 11 countries. Adjusted gross profit was $646.1 million compared with $565.1 million in the first quarter of 2021, reflecting a greater mix of our lower-margin Merchant Solutions revenue versus the prior year, lower margins in Shopify Payments due to mix, increased investments in our cloud infrastructure and the impact of the change in terms for our app and theme partners versus the prior year. Adjusted operating income was $31.9 million in the first quarter compared to $210.8 million a year ago as we bolstered our R&D, data and sales teams and stepped up performance marketing in both North America and internationally. Adjusted net income for the quarter was $25.1 million or $0.20 per diluted share compared with adjusted net income of $254.1 million or $2.01 per diluted share in the first quarter of 2021. Finally, our cash, cash equivalents and marketable securities balance on March 31 was $7.25 billion. This healthy cash balance is testament to the strength of our approach to capital allocation and operating discipline. Since day 1, we have funded our growth wisely. Over the past 7 years, we've raised $7.7 billion of funds via equity offerings in our convertible note, deployed $1.7 billion for investments in M&A as of March 31, 2022, and have conserved a strategic amount on our balance sheet for optionality. Outside of our acquisition of 6RS, all of our growth thus far has been organic, funded by redeploying gross profits back into the business to energize the flywheel. As I said in February, Shopify is focused on strategically allocating capital to 4 key investment themes in 2022, 1 of which is simplifying fulfillment for merchants. Shopify Fulfillment Network is making considerable progress against its road map. We've had great success migrating SFN merchants to the updated version of our new, simplified offering. Not only does it make fulfillment easier, SFN is designed to intelligently rebalance merchants' inventory to maximize their fast fulfillment reach with the lowest committed inventory. As Harley outlined, the acquisition of Deliverr helps Shopify Fulfillment Network accelerate its road map by assembling an end-to-end logistics platform that manages inventory from port to porch and across all sales channels for merchants of all sizes on and off Shopify. Soon, merchants will have access to Shop Promise, a new benefit in early access that displays expected delivery dates on merchants' online stores and other channels and consumers will see a new badge on products they browse. This delivery promise extends beyond the online store across surfaces like Google, Facebook, Instagram and the Shop App, helping merchants improve trust and increase sales with billions of potential customers by meeting them where they like to shop. And we'll leverage SFN's and Deliverr's fast fulfillment capabilities to power 2-day and next-day delivery promises. We view simplified, fast and affordable fulfillment across all sales channels as incremental to the Shopify flywheel with the aim of helping millions of future merchants start and scale their businesses. So it is with much excitement that we announced the acquisition of Deliverr. Under the terms of the agreement, Shopify will acquire all of Deliverr's outstanding securities in a transaction valued at approximately $2.1 billion, consisting of approximately 80% in cash and 20% in Shopify Class A shares. Most of the stock-based portion of the transaction consideration will be received by Deliverr's key management, will vest subject to certain conditions and will be treated as stock-based compensation. We expect the transaction to close following regulatory review. Our financial outlook for the rest of 2022, which includes the impact of Deliverr, is as follows: our outlook for the full year is guided by the same assumptions we gave you in February; we're operating in a more measured macro environment relative to 2021, moderated by inflation; e-commerce will continue to penetrate commerce overall; and the prospects for entrepreneurship and digital commerce are greater now than at any point in our history after 2 transformational years for the industry and for Shopify. What these trends mean for expectations for our own results is as follows: the year-over-year growth will be lower in the first half of 2022 and highest in Q4 given the absence of stimulus payments and expected higher inflation relative to the first half of 2021, that the number of merchants joining the platform in 2022 will be comparable to 2021 and that Merchant Solutions revenue growth will be more than double that of Subscription Solutions. Because of this larger mix of Merchant Solutions contributing to overall revenue, we expect gross profit dollar growth will trail revenue growth, which we still expect to be rapid and faster for the full year than our revenue growth in the first half. Our intention to reinvest all of our gross profit dollars back into the business this year remains intact since the pace of change independent brands need to get ahead of is not slowing down. Factoring in the effects of an inflationary environment on consumer spending, we expect our adjusted operating results to reflect the reinvestments in our 4 key themes outlined in February as well as the impact of Deliverr, which we expect to be dilutive to operating margin this year. As we help our merchants build buyer relationships, go global, grow from first sale to full scale and simplify fulfillment, we're arming them for long-term success. Finally, the estimates of stock-based compensation and related payroll taxes, CapEx and amortization of acquired intangibles incorporating the impact of Deliverr are now $800 million, $200 million and $62 million, respectively. Before turning it over to Katie to start the Q&A, I want to underscore the importance of long-term thinking that underlies our capital allocation decisions is how great companies are built. In the past, we have reinvested knowing we were laying the foundation for what we expected to be a much bigger company in the future. While we're much bigger today because we reinvested, the building that lies ahead of us is considerable, and that is a good place to be. Putting technology to work to help independent brands with everything from discovery to delivery guides us as we continue to build for the future of entrepreneurship. Katie Keita: Thanks, Amy. We'll now open the call for questions. We've all had the last couple of years to get accustomed to the raise hand feature in Zoom. So you should have no problem using that. We'll take questions in the order they come in. While we made our best efforts to boil down our prepared remarks to only the most relevant and we armed you with much of the content on the Events page of our Investor Relations landing page ahead of time, we still have a limited time for questions, so please ask just one very good question, so we can get to as many as possible. A - Katie Keita: And our first question this morning comes from Trevor Young at Barclays. Trevor Young: Just parsing out the GMV commentary into the key buckets, POS up nearly 80%, social, I think, quadrupling. If we assume social is like a low single-digit share, POS maybe mid-teens, that would imply the remaining 80% or 85% of e-com actually saw a very low single-digit growth year-on-year, call it, few percentage points. Is that the right way to think about it? Amy Shapero : So we gave you a little bit of information in the prepared remarks on e-commerce. We outpaced the overall U.S. market. The U.S. market grew, according to U.S. commerce data, approximately 10%. So that should have given you some view into the online performance. Katie Keita: Our next question comes from Daniel Chan at TD Securities. Daniel Chan: Deliverr counts some of your competitors as customers. What are your plans on maintaining a relationship with them, considering Deliverr likely benefits from the data, but its shipping capabilities would be a differentiator for you? Harley Finkelstein: I'll take that question. Look, the great part about Deliverr is that it accelerates what we've been planning to do with this end-to-end logistics network. It gets there faster. And the fact that they have a great experience, they have great software, great talent and scale means that we can give more of our merchants more control, more full visibility. And of course, they can own the relationship with the end consumer. So the idea here is we want to get our merchants high-reliability, fast, affordable delivery, and we think we can do that much faster with Deliverr. Now that being said, in terms of their existing businesses, obviously, we're going to adopt those businesses in. But we really are excited by the fact that Deliverr is asset-light, tech-driven, trusted by thousands of merchants. Some of those merchants are not on Shopify, some of them may come to Shopify eventually, but the idea is really about product acceleration here. Katie Keita: Our next question is from Tom Forte at D.A. Davidson. Thomas Forte : So I wanted to ask you a question that other companies such as have discussed this quarter. Given the weakness in your shares, how should investors think about your ability to attract and retain tech talent in a tight labor market? Tobi Lütke: Yes. It’s Tobi. I'll take that. Well, I mean we have amazing people coming. I think people are -- I mean this is a really good time to come to Shopify and others. We tend to not -- obviously, it comes up, the share price, obviously, people are making economic decisions in these kind of things, but maybe not quite as much as people think, like it's not really homo economicus, who is like engaged in the job market quite as much as one might think. What we find is people who are really, really interested in finding companies that are mission aligned with what they're doing, what they want to see, the change they want to see in the world. People are extremely excited, again, like Harley speaks eloquently about the role that Shopify has played during the pandemic. And a lot of people have had personal experience helping local businesses, many family businesses setting up Shopify stores during this time and have been sort of like in the orbital pull of coming to local Shopify to help more people in the same way, but from the inside instead of from the outside. So there were factors which are much more significant. We've all seen the articles about The Great Resignation, and like I think this has been largely misreported. There has been a big shuffle in the industry as people are making different life choices or just maybe look to find something new. But we are not really seeing this. So -- in fact, I think like the company is bringing in incredibly high talented people. It's -- I'm almost humbled by the -- like the incredible people I get to work with. And the people who are coming in are coming from all over. And now that we can hire everywhere in the world, that's even more of a factor. Just some of the most talented people I've ever met and encountered. So I think this is all going really well. And like retention, it's been -- again, there is more shuffling in general. And like I think locality is -- like people can now work for companies everywhere in the world, and so people are trying out what that's like. Funnily enough, we've actually seen a very large group of people coming back recently. Like that's -- I think actually my colleagues are talking about this too where this is actually almost a more notable trend right now than people like turning over quicker. It's the boomerang effect of people coming back to the companies that they started out in the pandemic. So honestly, this is a new dynamic labor market that has just put people in the driving seat to choose the companies to look for. I think every company needs to make sure that they are the kind of company that has the kind of challenges and the kind of talent density and the mission align us to attract the best people or people who are most appropriate for their particular missions, and I think Shopify does this extremely well. So we see this all working out. The stock price is something that factors into this, but it's one input of many. And it's -- like most people tend to understand that, the stock price is a sort of snapshot in time in a variable where people are making more long-term choices now, I think, now that they're a bit further away from pandemic. Katie Keita: Our next question comes from Colin Sebastian at Baird. Colin Sebastian: A question on the fulfillment initiatives and the vision for the end-to-end platform sounds quite compelling. Just hoping to dig a little bit more into how the build-out will work, in particular, given Shopify's engineering orientation, perhaps some additional context around the need to buy versus build on the software side. And then on the physical footprint, maybe help us with additional context around the scale of this operation in your vision and the potential investment required there to realize that long-term vision. Harley Finkelstein: Thanks, Colin. Look, I said this in the prepared remarks, but I'll repeat it again. Right now, merchants have to fumble through this maze of freight providers, 3PLs, middle- and last-mile carriers, just to name a few. And so what SFN handles is sort of that post-order phase of the merchant supply chain that includes new things, even like inventory balancing and delivery promise, which we've brought up and even simple returns. We also now have our proprietary warehouse management system now deployed across all warehouse locations. When you now add Deliverr to it, which is already fulfilling 1 million orders a month, this asset-light software product, and they already have -- they already manage distribution fulfillment for many -- across all merchant channels, it pairs perfectly together. And what we end up with in the end is this merchant-obsessed, end-to-end software and logistics platform. What we like about Deliverr and why Deliverr is such a perfect fit for Shopify is that it's software first. And the fact that it's asset-light, it's tech-driven means that we can manage our CapEx and also fit nicely into our existing product. I said this just a couple of comments to go, but this really does allow us to accelerate the product road map on delivering this end-to-end logistics network. The other thing that we just talked about is the Shop Promise. Now we can actually help consumers make better decisions by implementing Shop Promise, which shows 2-day and 1-day delivery promises to merchants' online stores and across places like Facebook, Instagram and Google, which increases consumer trust, and we think can actually really help our merchants. So like all of our acquisitions, culture fit, product fit really matters more than anything else, but also their business model and the way they think about their capital expenditure and their operating expenditure really resembles the way we think about things, which is really asset light. Katie Keita: Our next question comes from Gabriela Borges from Goldman Sachs. Gabriela Borges: Either for Harley or for Amy, some of the key macro dynamics that you're talking about with merchant adds and e-commerce GMV, how would you describe trends in the month of April compared to March and relative to perhaps however you think about a normal base length for seasonality? Amy Shapero: Yes. So I'll take that one. So let me just kind of land on Q2. So year-over-year, Q2 of 2021 still had stimulus in it, especially in the early part of the quarter, April, in particular. So there's still a year-over-year headwind with respect to that for April and Q2 of this year. Then we spoke about the shift in rebalancing and consumer spend to travel and services and in-person shopping, and we expect some of that to continue into Q2 with that normalizing into the back half. But if you look at any sort of mobility stats, it's now getting closer to what would be deemed normal, but there is still some rebalancing happening. And then the third factor that we talked about was inflationary pressure that we saw in Q1, which was not as big of a factor as the first 2 that I just talked about, but a factor. We're continuing to watch that one closely, and we expect that to ease as well into the back half of the year. Katie Keita: Our next question comes from Samad Samana at Jefferies. Samad Samana: So I just -- I want to think about the spending and the OpEx plans. When I think about net adds being down, I know it's tough comps in the surge of new merchant formation, but the projections kind of have sales and marketing growth being pretty dramatic in 2022. And with net adds, I expect it to be kind of consistent with 2021. Is it just getting more expensive to acquire customers? Is that sales and marketing expense more about like 4 different type of customer that you're going to acquire? Can you just help us think about what the saw means for spend and unit economics over the intermediate term? Harley Finkelstein: A couple of things. In terms of -- I think in a very difficult quarter in the market, generally, we showed a profit in AOI. But more importantly, if you look over a 2-year period, 2-year CAGR on revenue was 60%, 2-year CAGR in GMV was like 57%. I think something that is getting missed here that is really, really important is that our value proposition, especially in an inflationary environment, is really unparalleled. Our Merchant Solutions revenue as a percentage of GMV was as high as it's ever been. That means that our -- more merchants are coming on, but also, more importantly, our merchants' usage of our product and solutions like Capital Payments, for example, are the highest they've ever been. And that means we're adding more value and solving more of their problems. So in terms of sales and marketing, we want to bring more merchants on to the platform. We're also getting merchants from a lot -- across the globe, not just in our core geographies, but internationally. And then once they come on, we really want to be well positioned to cross-sell all our different products and solve more of their needs. What tends to happen -- the Shopify business model that really hasn't changed in a couple of years is that there are these different on-ramps at the Shopify. People come to Shopify to solve a single problem. And then once they come in, they realize we can solve more of their problems. A great example of that, by the way, is the rebalancing back to physical retail. We had all these merchants come on during the pandemic who are offline retailers, needed to come online and they came with us and they trusted us. And so now that their offline stores are reopening, their physical series reopening, they're now migrating over direct point of sell product. This idea of becoming the most important piece of software they use isn't necessarily just online or offline, it's all of those merchant solutions as well. So part of what we're trying to do right now is really become a well-oiled machine when it comes to making sure that every merchant that comes on to the platform takes more of our products, and we solve more of their problems. That is really key here, and I think that's the reason why you're seeing these numbers. Katie Keita: Our next question comes from Josh Beck at KeyBanc. Josh Beck: I wanted to go back to fulfillment. Certainly, it's really encouraging that you're planning on having, I believe, all of the SFN volume on your own WMS by, I believe, the end of Q2. I'm just curious, when you step back and now factor in the contribution from Deliver, if the scale phase is still targeted for second half of '23 or '24 or if there's potential acceleration. Just curious on that transition now that we certainly have a larger team and more capabilities in this area. Amy Shapero: And we did say that Deliverr does accelerate fulfillment volumes. We gave you the number. They are currently over 1 million fulfillments per month and growing. So that certainly does give us additional volume more quickly. The expectation is that scale will still be towards the back half of 2023 and into 2024, and we've always said that's where the unit economics really start to shift to favorable. So we fully expect the volumes to continue to increase into that timeframe. Katie Keita : Our next question comes from Matthew Pfau at William Blair. Matthew Pfau: I wanted to just ask on the announcement of Amazon extending Prime to merchants' owned sites. Does that have any impact on your business or maybe perhaps more specifically on how you're thinking about your fulfillment efforts? Tobi Lütke: Yes. So I think the best way to think about this is -- well, look, I know this is like people look at this and say, okay, well, what is Shopify thinking about this? And so I think you're probably worth spending a second talking about this because I think it's more interesting than what people might imagine. Again, Shopify is mission-driven. What we really want to see is that the Internet is this incredible entrepreneurial canvas for people. We want to see people being able to reach the independents. When life's plan a doesn't work, they can engage in entrepreneurship to see if there's something else in store for them, quite literally. So what we get excited about is if infrastructure is shared with small businesses. Because a lot of what happened in the sort of few decades of -- since the '90s on the Internet is that almost all the infrastructure that was built up, digital and otherwise, really, really benefited to the already big. Like a huge factor, like we all know but here in the Software-a-Service space. The Software-as-a-Service base was largely something that got delivered to enterprises. In the way we sort of measured service businesses initially kind of really didn't work for people looking at Shopify because Shopify was like extending very much to people -- sometimes almost consumer level down in the market. We often are the first thing that people sign up and they incorporate and they only become a business shortly after. So we are actually thrilled with Amazon making a decision to take the amazing infrastructure that they've built because they have a second to none infrastructure and want to share this broadly with small merchants across the Internet. And so we are happy to integrate this into Shopify, just in the same way how we integrated what -- the infrastructure that Meta built, the infrastructure that Google built and the infrastructure that TikTok built and so on. So this fits perfectly into our build view. And it's not nearly as some people make it out to be. Whatever is good for merchants is -- that will cause more entrepreneurship, which is exactly helps the vision of a company. And from a business perspective, again, the more channel that exists that are valuable for selling, the more important Shopify tools has become because managing this is a task of significant complexity and software integration can tame that complexity and create a cohesive view into the business and again, make it much more possible for small businesses to engage in very complex retail strategies that previously you would have to -- you would need a lot of headcount for. So this is all -- this is actually really good news from our perspective. Katie Keita: Our next question comes from Tyler Radke at Citi. Tyler Radke: So Amy, I wanted to ask you just how we should think about the moving pieces in the guidance and specifically, kind of what has changed in terms of your assumptions. So it looks like you're calling for merchant additions for the full year to be similar to last year. I think last quarter, you'd expected a bit higher. And so just help us understand how much you're kind of revising things down, given the macro challenges that you saw out there this quarter. Amy Shapero: Yes. So we've already talked a little bit about GMV. So just landing on the merchant adds for the year, we did say we expect to add a number similar to 2021. Based on what we saw in the first quarter, I said in my opening remarks, we did see lower merchant adds than last year. We largely attribute that to a very tight and transitional labor market. We could draw correlation to our merchant adds to what was happening in the first quarter, not causation, but correlation. We expect that labor market will start to ease. We're already starting to see news and information about that easing. And in addition, we have sales and marketing and commercial initiatives, growth initiatives underway that are gaining traction that we expect will continue to gain momentum through the course of the year and have a greater impact on the back half of the year. So we're very confident about the continued opportunity of more merchants around the world. The international, rest of world, outside of North America remains very robust territory for us, and so we're confident in that number. Obviously, the other change that we made was somewhat around adjusted -- or, I guess, what we said we would reinvest all of our gross profits back into the business, which we said last quarter. And then we added that Deliverr, would be dilutive to our operating margin. And so what we mean by that -- let me just give you a little bit of information so that you can size the Deliverr impact. We expect Deliverr to add a couple of points of growth to Shopify's top line in 2022, keeping in mind this represents approximately a half a year of ownership. We expect Deliverr to be slightly dilutive to Shopify's 2022 adjusted gross margin. And about 80% of their OpEx is headcount driven, which is about 400 employees. So that gives you a really good idea of the size there. So with that information, you should be able to arrive at where we are on our operating side. Katie Keita: Our next question comes from Paul Treiber at RBC. Paul Treiber: A question for Tobi. There's various views out there on the proposed founder share. Could you provide your perspective on governance in general? And then perhaps more directly, can you just put in your own words to shareholders why you feel that shareholders should vote for the proposal? Tobi Lütke: Yes. Thank you. Well, look, this is something that our Board of Directors has been looking at for a long time. We've obviously included the B-share structure in the IPO. And the Board has seen this as a very, very positive thing for the company. It's like it's a founder-led company, and it's a structure that supports this kind of structure of the company very well. And we IPOed at a $1 billion valuation, and it's seen us well to this point. And -- but to be perfectly honest, like we were in a bit of a rush when we decided to IPO back in the day, and we took a structure basically off the shelf without contextualizing it to what we really would like. And so, there's also some aspects that we'd rather like to change about it. So this proposal is kind of designed to change some of our governance things. For instance, like it's going -- it's taking the B Class -- like it's replacing the B Class of a founder share that causes it to go from a majority control to a minority control. It's now going to be capped at 40%. It removes awkward things like intergenerational transfer from the things that can be done with these shares. And it's -- shareholders can get some assurance that this is really a structure supporting the sort of founder-ledness of a company by creating like a service-based requirement for my involvement. And I think that -- I mean it's a proposal designed to be accepted. Obviously, like -- it's -- at the day, it will change from one to the other. It's -- on all measures, things come down to lower percentages. And the Board thinks this is a better governance structure for the future. And so that's why it's included. Harley Finkelstein: I'll just add something that I don't think Tobi would say, but I certainly can say based on my experience at Shopify and my experience working with Tobi for well over a decade. I think that anyone that knows management knows Tobi, knows that this is a founder who not only cares deeply about building a 100-year company. It's also -- Tobi has a proven track record and he can scale the business really well. He makes really good decisions in very complex very fast-moving spaces. And I think it's a combination of his technical knowledge, his vision, his domain expertise and frankly, some very serious crystal ball skills. And on top of that, he's a thoughtful leader, and that leadership has delivered returns of over 60% per year compounded annually since our IPO. And so that's something he won't say, but certainly something that I will say. Katie Keita: Our next question comes from Deepak Mathivanan at Wolfe Research. Deepak Mathivanan: Amy, can you add a little bit more color on the retention trends on SMB merchant side? Are you seeing a higher level of activity or merchant churn in the non-Plus side of the business? And specifically on the e-commerce side, given that e-commerce trends are moderating and entrepreneurship activity may be kind of like moderating, I just want to hear a little bit more color on that. Amy Shapero: No, we really haven't seen any significant changes in the churn rates in any of the segments Plus or non-Plus. Katie Keita: Our next question comes from Siti Panigrahi at Mizuho. Sitikantha Panigrahi: So I wanted to understand a little bit about the offline commerce opportunity that you highlighted, offline commerce. So is it mostly the customer who heard brick-and-mortar store, they move to online there going after your offline solution? Or do you see just incremental merchants as well? So if so, what percentage of your merchants right now have the brick-and-mortar store? Harley Finkelstein: I'll take that question. I mentioned this earlier, but we are seeing -- as retail and commerce rebalances with reopenings, we are seeing obviously, more merchants interested in selling offline. A lot of those offline merchants that were sort of single point offline merchants prior to the pandemic that came online during the pandemic, they are now coming to us and expanding their -- what they take from Shopify beyond online to offline as well. And part of the reason you're seeing Q1 point-of-sale GMV grew by nearly 80%, which outpaces the broader offline retail market, is because they're taking more of our solutions. The other part about it is because of our point-of-sale and our point-of-sale Pro adoption continues to grow, we're also growing it well beyond North America and new geographies. We have new integrated hardware. We have new payment integrations. We are also seeing balance come from new businesses to Shopify as well. And so I think what you will see similar to some of our other products and other solutions like Shopify Plus, for example, is you will continue to see a healthy mix of people that are already on Shopify expanding and taking more from us, but also people that are coming to Shopify to use our point-of-sale product. And that's the reason why we're making a lot of these key investments. And we've been working on point-of-sale for a long time. It's now in 11 countries. It now has, we think, the best hardware, the best software. And so we will continue to see people coming to Shopify for point-of-sale and then expanding into other of our solutions as well, and that mix should continue. Katie Keita: Our next question comes from Ygal Arounian at Wedbush. Ygal Arounian: I want to go to Harley's comments in the shifting digital ads landscape and maybe if you could just paint a little bit more picture of some of what you're seeing around IDFA, the challenges that Facebook is seeing. And then the stuff you pointed out with Deloitte and Accenture and larger advertisers sounds like something that could potentially be powerful and promising. If you could expand on that a little bit. Harley Finkelstein: Thanks for the question. Yes, the second part is -- I'll answer first because it's shorter. I mean, look, we have been stretching upmarket for quite some time. Shopify Plus came out, I think, 7 or 8 years ago at this point. And now we are seeing much bigger brands wanting to use Shopify, whether it's Audi or it's World Vision. Some of those brands, some of those merchants, they want to come to Shopify in a different way than maybe we're used to, which often is self-server with one of our agency partners. And so working with Deloitte, working with Accenture, who we've been talking to for some time and actually formalizing an agreement, makes the onboarding from those very large brands through those large consultancies to Shopify a lot easier. What we're also doing is building incredible trust with folks like Deloitte and Accenture so that they can sell more of Shopify, which, of course, we like. And the fact that their customers are asking for Shopify, I think, is a great endorsement. In terms of the IDFA, we said this before, there is no discernible impact we've seen so far. We do believe these changes have created some friction for merchants and advertising and have lowered their return on ad spend. That is not necessarily a good thing, and it has disproportionate impact on SMBs. But that is why it's precisely why we continue to connect with and even transact with buyers across many channels, whether it's social or it's search or email or it's shop. And those things make it a lot easier, those also mitigate the risk of those type of advertising changes. So then when you look at what happened in the quarter just around -- in terms of social commerce and you see that social commerce had -- it's gaining traction. Orders placed in those services more than quadrupled this quarter last year, we're really -- we think that's really exciting. And more and more merchants are using things like Snap and Spotify and TikTok in need of shopping on Facebook, Instagram and even Google through Shopify to reach more of those buyers and do it in a direct way. So we're excited by that. And again, a 4x increase year-over-year, I think, speaks that there's real momentum in the social commerce space. Katie Keita: Our next question, and it looks like it's going to be the last question we have time for, comes from Darren Aftahi at ROTH Capital Partners. Darren Aftahi: Can you just kind of speak to relative growth of non-English-speaking Plus merchants versus those that are English-speaking? Harley Finkelstein: Yes. And in terms of Shopify Plus, I said this in the prepared remarks, but I'll just repeat it. It was a very strong quarter for Shopify Plus. We had our strongest number of deals ever closed in a single month. That's 20% more deals than March than any other month. And our share of Plus merchants outside of North America expanded. So I think we'll continue to see that. We also see a mix of both strong upgrades as well as net new to Shopify. That will continue as well. But Shopify Plus, some of the names that I'm talking about, whether it's Havaianas in Mexico, one of the largest footwear brands in the planet; or its company's like Fiora or it's TRX, we believe that Shopify is the best -- Shopify Plus the best product for growing brands that want to have modern commerce and modern retail. And so we'll continue to invest in that. We're also making a lot more -- adding more features, more functionality, things like Shopify Flow, for example. And I think Shopify Plus is getting a lot of traction here, but it will not only be North America, it will be global. Katie Keita: Great. Thanks, Harley. Well, we are out of time. You know where to find us if you have any follow-up questions. Thank you, everyone, for your time today. This concludes this morning's call and webinar. Everyone can now disconnect.
Shopify (NYSE:SHOP) Maintains "Overweight" Rating by Morgan Stanley
- Morgan Stanley reaffirms its "Overweight" rating for Shopify (NYSE:SHOP), signaling strong confidence in the company's growth trajectory.
- Shopify's stock performance outpaces the S&P 500, with a 48% increase in November 2024, driven by high transaction volumes during the holiday season.
- The company's strategic partnerships and a significant role in the e-commerce software market are key factors in its continued success.
On December 3, 2024, Morgan Stanley reiterated its "Overweight" rating for Shopify (NYSE:SHOP), with the stock priced at approximately $111.87. This decision reflects confidence in Shopify's growth potential, as the company continues to expand its influence in the e-commerce sector. Shopify's strategic partnerships and robust performance have positioned it as a key player in the industry.
Shopify's business is experiencing significant growth, reminiscent of the surge it saw during the pandemic lockdowns. In November 2024, Shopify's stock price increased by 48%, nearly doubling the year-to-date rally of the S&P 500. This impressive performance is driven by strong transaction processing volumes, particularly during the holiday season, as highlighted by S&P Global Market Intelligence.
The company's market share in the global e-commerce market has reached 16%, matching its peak during the pandemic. This resurgence is supported by a consistent increase in sales volumes, with over 20% year-over-year growth for each of the last five quarters. Shopify's platform facilitated over $270 billion in gross merchandise volume, underscoring its significant role in the e-commerce software market.
Shopify's financial results for the third quarter of 2024 revealed a GMV of nearly $70 billion, marking a 24% increase compared to the previous year. This growth has translated into a 26% year-over-year increase in Q3 revenue, reaching nearly $2.2 billion. Additionally, Shopify's free-cash-flow margin reached an impressive 19%, further solidifying its financial health.
Despite the competitive nature of the industry, Shopify has consistently pursued partnerships, even with direct competitors, to expand its offerings. Recently, Shopify partnered with three major tech giants to bolster its growth and maintain its competitive edge. This strategic approach highlights Shopify's commitment to collaboration as a means to enhance its services and continue its upward trajectory in the e-commerce landscape.
Shopify (NYSE:SHOP) Earnings Report Highlights
- Shopify's revenue growth of 26% year-over-year, surpassing estimates.
- The company reported an EPS of $0.29, missing the expected $0.37.
- Shopify's valuation metrics indicate investor confidence despite a high P/E ratio.
Shopify (NYSE:SHOP) is a leading e-commerce platform that enables businesses to create online stores. It offers a range of services, including payment processing, marketing, and shipping solutions. Shopify competes with other e-commerce giants like Amazon and eBay. The company has gained attention for its innovative approach and strong market presence.
On November 12, 2024, Shopify reported earnings per share (EPS) of $0.29, which fell short of the estimated $0.37. Despite this, the company generated revenue of approximately $2.23 billion, surpassing the estimated $2.15 billion. This revenue growth reflects a 26% increase year-over-year, as highlighted by Zacks Investment Research.
This positive outcome has captured the attention of investors and analysts, positioning Shopify as a key player in the market. The company's management remains optimistic about maintaining a similar growth trajectory for the fourth quarter.
Despite a high price-to-earnings (P/E) ratio of 113.64, Shopify's valuation metrics indicate investor confidence in its growth potential. The price-to-sales ratio of 18.68 and enterprise value to sales ratio of 18.63 suggest that investors are willing to pay a premium for each dollar of sales. Shopify's low debt-to-equity ratio of 0.10 and strong current ratio of 7.32 highlight its financial stability.
Shopify's strategic shift towards enterprise opportunities is expected to drive future growth. The company's ability to sustain margin expansion and increase its valuation will depend on continued growth and strategic execution. As Shopify navigates a competitive environment, its focus on enterprise solutions could enhance its growth outlook and market position.
Shopify Stock Gains 2% Following Evercore Upgrade
Shopify (NYSE:SHOP) shares rose more than 2% pre-market today after Evercore ISI upgraded the company to Outperform from In Line, setting a price target of $75 per share. Shopify shares have fallen 15% year-to-date, but Evercore sees this as a prime opportunity to invest in a top-tier e-commerce platform.
Evercore expressed strong confidence in Shopify's long-term potential, highlighting its substantial total addressable market of approximately $850 billion, robust competitive position, opportunities in higher market segments, proven record of product innovation, and the potential for significant profitability growth.
Additionally, the analysts noted that recent disappointing operating margin outlooks from the last two earnings reports have led to significant share price and estimate corrections, which they believe have mitigated risks associated with Shopify shares.
The firm also praised Shopify's strategic decision to focus on social media marketing to boost international growth, considering it both tactically and strategically sound.
Goldman Sachs Upgrades Shopify to Buy: A Turning Point for the E-Commerce Giant
- Goldman Sachs upgraded Shopify to a Buy rating, signaling a positive outlook on the company's future performance.
- Despite a 40% decline from its high in February and a 90% drop during 2021 and 2022, Shopify's strategic focus on core business segments suggests potential for recovery.
- The company's shift towards higher-profit software offerings and the robust adoption of Shopify Plus highlight its strength and potential for margin expansion.
Goldman Sachs recently upgraded Shopify (NYSE:SHOP) to a Buy rating from a Neutral stance, a significant change that caught the attention of investors and market watchers alike. This upgrade, announced on May 21, 2024, when the stock was trading at $57.02, signals a positive shift in the investment bank's outlook on Shopify's future performance. The news, as reported by StreetInsider, highlights a turning point for the e-commerce platform, which has faced considerable challenges over the past few years.
Shopify has been through a rough patch, with its stock price declining by about 40% from its high in February, despite the broader market reaching record highs. This downturn is part of a longer trend of struggle for Shopify, which saw its stock value plummet by 90% during 2021 and 2022. The situation seemed to hit a low point when shares dropped over 15% following weak guidance from the company. However, CEO Harley Finkelstein's statement that this is "the strongest version of Shopify in our history" suggests a strong belief in the company's resilience and potential for growth.
The challenges Shopify faced included higher operational expenses and concerns over revenue growth, particularly in the spring 2024 quarter. Despite these hurdles, the company's focus on its core segments—subscription solutions and merchant solutions—remains strong. Shopify's decision to divest its low-margin in-house logistics and merchandise warehousing segment is a strategic move to concentrate on higher-profit software offerings. This shift, although contributing to a perceived drag on year-over-year revenue growth, is seen as a step towards focusing on more profitable areas of the business.
The recent dip in Shopify's stock, attributed to concerns over slowing revenue growth and challenges in achieving net profitability, presents a potential buy-the-dip opportunity for investors. The company's robust adoption of Shopify Plus and its significant contribution to margin expansion underscore the strength of its business model. Despite the stock's recent performance, with a decrease of approximately 3.21% to $57.02, Shopify's market capitalization of roughly $73.4 billion and a trading volume of about 13.35 million shares reflect its substantial presence in the market.
In summary, Goldman Sachs' upgrade of Shopify to a Buy rating marks a pivotal moment for the company, suggesting a brighter outlook ahead. Despite facing significant challenges, Shopify's strategic focus on its core business segments and the strong adoption of Shopify Plus indicate potential for recovery and growth. Investors and market watchers will be keenly observing how these strategies unfold in the coming months, potentially leading to a rebound in Shopify's stock performance.
CIBC Upgrades Shopify (NYSE:SHOP) to Outperform
On Thursday, May 9, 2024, CIBC updated its grade for Shopify (SHOP:NYSE) to Outperform, maintaining a hold action. This assessment came as Shopify's stock was trading at $62.22. CIBC's reiteration of the Outperform grade suggests they see the recent selloff following Shopify's earnings as a buying opportunity. This perspective was shared in a publication by TheFly, highlighting the potential upside seen by CIBC in Shopify's current valuation. The adjustment in CIBC's outlook for Shopify reflects a broader sentiment among financial analysts, who remain optimistic about the company's long-term growth prospects despite short-term challenges.
Shopify's stock experienced a significant drop of approximately 20% following its first-quarter earnings report, which did not meet the guidance expectations set by Wall Street. This decline was notably the most significant in the company's history, plunging the stock price during midday trading on Wednesday. Despite this, analysts at Oppenheimer maintained a positive outlook on Shopify, reaffirming an outperform rating and setting a price target of $90 for the stock. This target suggests a potential upside of about 45% from the stock's price on Thursday, indicating a strong belief in the company's recovery and future growth.
The drop in Shopify's stock price came after the company's earnings report revealed solid first-quarter results but provided guidance for the second quarter that fell short of Wall Street's expectations. Specifically, Shopify reported adjusted quarterly earnings of $0.20 per share, which exceeded the Zacks Consensus Estimate of $0.16 per share, marking a substantial improvement from the earnings of $0.01 per share reported a year ago. This performance, representing an earnings surprise of 25%, alongside revenues of $1.86 billion that also surpassed the Zacks Consensus Estimate, underscores the company's operational strength. Furthermore, Shopify's gross merchandise volume increased by 23% to $60.9 billion, exceeding consensus expectations and highlighting the platform's growing transactional volume.
However, the company's warning of a potential slowdown in revenue growth for the current quarter, attributed to the sale of its logistics business last year, has cast a shadow over its near-term financial outlook. This news adversely affected the net worth of Shopify's billionaire CEO, Tobias Lutke, erasing over a billion dollars from his fortune. Despite these challenges, the fundamentals of Shopify's business remain strong, as evidenced by its ability to exceed headline estimates and its substantial year-over-year growth in revenues and gross merchandise volume.
Shopify's current market position, with a stock price now at $62.33, reflects the volatility and challenges the company faces in a competitive e-commerce landscape. Despite the recent downturn, the company's market capitalization of about $80.23 billion and trading volume of 11.03 million shares demonstrate significant investor interest and confidence in its long-term potential. As Shopify navigates through these challenges, the support from financial analysts like CIBC and Oppenheimer underscores a belief in the company's resilience and capacity to capitalize on future opportunities in the e-commerce sector.
Shopify Inc. (SHOP:NYSE) Sees Significant Price Target Increase by CIBC Analyst
On Thursday, May 9, 2024, Todd Coupland of CIBC set a significant price target for Shopify Inc. (SHOP:NYSE), suggesting that the stock could see a substantial increase to $85, which would be a 36.61% jump from its current price of $62.22. This optimistic outlook comes in the wake of Shopify's earnings selloff, which Coupland views as a prime buying opportunity for investors. This perspective was shared in a report by TheFly, indicating a bullish stance on Shopify despite recent market turbulence.
Shopify, a leading cloud-based, multi-channel commerce platform, faced a sharp decline of about 18.6% in its stock price on May 8, 2024, following the announcement of a lower-than-expected revenue forecast for the second quarter of the year. However, it's important to note that Shopify's first-quarter earnings for 2024, announced before the market opened on the same day, painted a different picture. The company reported adjusted quarterly earnings of $0.20 per share, surpassing the Zacks Consensus Estimate of $0.16 per share. This marked a significant improvement from the $0.01 per share earnings reported in the previous year, showcasing an earnings surprise of 25%.
Furthermore, Shopify's revenue for the quarter ending in March 2024 reached $1.86 billion, exceeding the Zacks Consensus Estimate by 1.36%. This revenue figure represents a considerable growth from the $1.51 billion reported in the same period the previous year. The company also highlighted a 23% increase in gross merchandise volume (GMV), which amounted to $60.9 billion, surpassing consensus expectations. This indicates a robust growth trajectory for Shopify, underscoring the platform's expanding reach and effectiveness in facilitating e-commerce transactions.
Despite the recent selloff, Shopify's stock is currently trading at $62.33, with a slight decrease of $0.4 or -0.64%. The trading session saw fluctuations between $61.61 and $63.77. Over the past year, Shopify's shares have experienced highs and lows, reaching up to $91.57 and dipping to $45.5, respectively. With a market capitalization of approximately $80.23 billion and a trading volume of 8.54 million shares, Shopify remains a significant player in the Internet - Services industry, demonstrating resilience and potential for growth amidst market challenges.
The analysis by Todd Coupland and the subsequent financial performance of Shopify highlight the company's ability to exceed earnings expectations and continue growing its revenue and GMV. This suggests that, despite short-term market reactions to its revenue forecast, Shopify's underlying business remains strong and capable of delivering value to its shareholders. Coupland's price target reflects confidence in Shopify's long-term prospects, presenting a compelling case for investors to consider Shopify as a viable investment opportunity, especially in the wake of its recent price dip.
Scotiabank Updates Shopify Rating to 'Sector Perform', Raises Price Target
Scotiabank Updates Shopify Rating to "Sector Perform"
On Thursday, May 2, 2024, Scotiabank's update on Shopify (SHOP:NYSE) to a "Sector Perform" rating and the decision to maintain a "hold" action signifies a nuanced view of the company's stock. This adjustment, made when the stock was priced at $71.13, and the increase in the price target from $70 to $80, as reported by TheFly, suggest a cautiously optimistic outlook on Shopify's future market performance. This perspective seems to be rooted in a detailed analysis of Shopify's operational and financial metrics, as well as market conditions that could influence its stock price.
The anticipation surrounding Shopify's earnings report for the quarter ended March 2024 adds another layer of context to Scotiabank's rating adjustment. According to Zacks Investment Research, Shopify is expected to report a year-over-year increase in earnings and higher revenues. This potential for growth, coupled with the possibility of surpassing Wall Street's consensus expectations, could be a driving factor behind Scotiabank's revised price target. The focus on whether Shopify can deliver a positive earnings surprise, with a projected quarterly earnings of $0.16 per share, underscores the critical nature of the upcoming earnings report in shaping investor sentiment and stock valuation.
The recent performance of Shopify's stock further complements Scotiabank's analysis and expectations. With a price increase of $1.83, marking a 2.60% change, and the stock currently priced at $72.23, there is evidence of positive market movement. This fluctuation within a trading day, ranging from a low of $70.23 to a high of $72.7, alongside a significant year-over-year low and high, highlights the stock's volatility and the market's responsive nature to Shopify's operational successes and challenges. The company's impressive market capitalization of approximately $92.97 billion, coupled with a trading volume of about 2.59 million shares, further illustrates its substantial presence and investor interest in the stock market.
The interplay between Scotiabank's updated rating and the anticipation of Shopify's earnings report underscores the intricate relationship between analyst ratings, earnings forecasts, and stock market performance. Scotiabank's decision to adjust its price target ahead of the earnings report suggests a belief in Shopify's potential to meet or exceed earnings expectations, which could positively impact its stock price. This strategic analysis, grounded in financial metrics and market trends, provides investors and stakeholders with a comprehensive view of Shopify's current position and future prospects in the competitive e-commerce landscape.
