Shopify Inc. (SHOP) on Q2 2021 Results - Earnings Call Transcript
Operator: Thank you for standing by. This is the conference operator. Welcome to the Shopify Second Quarter 2021 Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Katie Keita: Thank you, operator and good morning everyone. We are glad you can join us for Shopify's second quarter 2021 Conference call. We are joined this morning by Tobi Lutke, Shopify's CEO, Harley Finkelstein, Shopify's President, and Amy Shapiro, 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 US and Canadian regulators. Note that adjusted financial measures we speak to today are non-GAAP measures, which are not a substitute for GAAP financial measures. Reconciliations between that two can be found in our earnings press release. And finally, we report in US dollars. So all amounts discussed today are in US dollars unless otherwise indicated. With that, I turn the call over to Harley. Harley Finkelstein: Thanks Katie, and good morning. Shopify's momentum continued in our second quarter as strong commerce trends prevailed and more merchants joined and succeeded on our platform. In fact, GMV reached its highest level ever as physical stores in more regions reopen their doors in the early days of the post-pandemic recovery and as buyers continue to value the convenience that online tools bring to shopping. Case in point in place that have begun to reopen like the UK, GMV grew faster than our overall GMV in the quarter year-over-year indicating that online and in-store commerce are no longer mutually exclusive. And while we did start to see a shift in some consumer spend back to services and recreation towards the end of the quarter, which we expected all regions remain at GMV levels above pre COVID levels. This may be why Shopify remains the go to platform for entrepreneurs around the world, to launch and to grow their businesses as they sell directly to their customers. Merchants using Shopify are exceptionally well prepared to make commerce happen on every surface area that it needs to whether it's online, in store or through your favorite apps. Our brick and mortar merchants illustrated this as they adapted to the accelerated shift to digital commerce in 2020 and are now navigating the early stages of returning to in-store selling. Retail point of sale GMV is nearly back to pre-COVID levels as a percentage of overall GMV, even on these higher GMV levels as physical stores reopen and merchants are better equipped with our upgraded hardware and software. More locations adopted point of sale Pro in our second quarter for its modern omnichannel features like buy online, pickup in store, which was adopted by 63% of brick and mortar merchants in English speaking geographies at the end of June. This is up from just 2% in February last year. Katie Keita: Thanks, Amy. Before we open the call up for questions. I'll remind you to limit yourself to a single question. That way more people will get a chance to ask a question on the call this morning. Ariel, can you take the first question please. Operator: Certainly, Our first question comes from Craig Maurer of Autonomous Research. Please go ahead. Craig Maurer: Yes, hi, thanks for taking the questions. So two questions, one around payments. Regarding the Shop Pay announcement, you guys had during the quarter around making the Shop Pay button available to non-Shopify platform merchants. Is there an opportunity to take the Shop Pay button to a full stack processing solution and connecting with stripe on the back end to be a full stack PayPal competitor? And secondly, we heard that Shopify is now powering a large global brand in Brazil, as that large global brand pulled you into Brazil. And I was wondering what the growth opportunities are for Shopify going forward in that region. Thanks. Harley Finkelstein: Hey, It's Harley. I'll take that question. On the international side, I mean, as Amy discussed in her, in her remarks as well. International remains an important part of our business in our growth story. In fact merchants from outside North America grew, as a percentage of our total merchant mix in Q2 year-over-year and year over year GMV growth in the rest of world actually outpaced North America in Q2 2021. So we're seeing more international merchants that are joining and they are succeeding on Shopify and obviously we're stepping up our growth marketing, our sales, and our support effort in places like, like Brazil and all over the world. So it isn't necessarily any particular focus on Brazil per se but there, merchants around the world are looking for retail operating system and Shopify certainly is a favorite of theirs and we're able to help them sell in the way that they want. In terms of the Shop Pay question, look, I mean the ability we think Shop Pay is the best way to check out on the Internet, it's fast, it's secure. Merchants love it because it helps with conversion rate. Consumers love it because it allows them to check out really, really quickly. So making that available on more services, whether it's on Facebook or it's on Google or Instagram, Shopify merchants and also to non-Shop merchants. We just think that's the right thing to advance commerce. Tobi Lutke: This is Tobi, I think you have questioned specifically about how far we can take us beyond the Shopify platform. I think the reason why Shop Pay has been successful, it's highly bespoke to particular, to the Shopify platform like we can bid in based on assumptions that you can make about the merchants and their capabilities because they up like because of integration, we have, I think if you go beyond run of a platform for its customers, then we would have to lose a lot of a differentiation. So if there is no, that would be an adjacency for the product and we have no such plans. Craig Maurer: Okay, thank you so much Operator: Our next question comes from Thomas Forte of D.A. Davidson. Please go ahead. Thomas Forte: Thanks for taking my question. So wanted to know what the financial implications are of not collecting a commission on the 1st million of revenue for developers in Shopify and lowering your take rate after the first million to 15% from 20%. A - : Yeah. The change in the App Store and the revenue models that was announced that unite are not material to price results in the back half of this year or for the full year. And I want to emphasize that while it's not material for us, it is material for our developer partners and we are committed to our developers and believe this is the right long-term benefit for our merchants and our partners to help them be more innovative and creative on behalf of our merchants and to keep more of the dollars in their pockets and so that any short-term loss of revenue in the back half is immaterial to us and well worth the long-term benefits. Thomas Forte: Thank you. Operator: Our next question comes from Ken Wong of Guggenheim Securities. Please go ahead. Ken Wong: Great, thank you for taking my question. This one is for Tobi or Harley. Just over the past month the company has introduced Search and Shop App conversion of add in, in the partner App Store and we see theoretical headlines like an audience network out there, how are you thinking about advertising as a product category and in what areas do you think makes sense for Shopify to potentially monetize on those products. Tobi Lutke: Yeah. There is no one like approach here. I think you what you're hearing about is a lot of early experimentation, the nature of advertising is like, it's very hard to conduct a test, but no one fees because I don't think that would lead to any useful data. So there is a bit of loading and public going on there. We obviously look back from value. Our merchants obviously want to deepen their relationship with existing BIOBASE shop, it's specifically really good, enriched in nature. We are the bridging that gap as currently what we are trying to just cover and we are taking of some opportunities again but some companies, any product for Journeys, some does you don't quite know where it leads, suddenly then I started thought, but we would be bidding Fulfillment warehouses or do loans to a degree and advances to the degree that we are doing now. So again, I think you'll see a very early representation of early attempts there and we really have no line of sight on what that does to revenue and that is certainly not why we trying any of those things, be thinking out what the right mix of products is for new merchants who are trying to build a business and reach for independence. And if advertising from us powered us in some means is part of that, we will hopefully know that over the next years. Katie Keita: Thank you, Ken. Operator: Our next question comes from Siti Panigrahi of Mizuho. Please go ahead. Siti Panigrahi: Thanks for taking my question. It's impressive to see this record GMV. I know you guys don't disclose merchants. But how do you say the trends in GMV per merchant trend this year and also especially in July. What you're seeing and what's your expectation on that trend for the remaining of the year. A - : Yeah. The productivity of our merchants has remained strong. On the platform as it's Harley said in our opening remarks the $42 billion of GMV on the platform was a record and so GMV per merchant remains strong year-over-year and it's really the combination of what Harley talked about POS, our physical retail GMV, has had 4 consecutive quarters of acceleration, is now back to the percentage mix pre COVID on much higher GMV levels. They were seeing strong productivity there. And with respect to online GMV, we do believe that it has reset at a higher level and is now just growing at a more normalized level. And so we use the UK as an example of one of the economies that reopened first and our UK GMV grew faster than our average suggesting that when we equip merchants with multi-channel, they do better in a very fluid commerce environment. We also saw social GMV increase substantially, it's still small as a percentage of our mix, but the growth quarter-over-quarter and year-over-year was significant. And so these are all things with the multi-channel approach that we expect will help continue to keep GMV per merchant strong. Siti Panigrahi: Thank you. Katie Keita: Thanks Siti. Operator: Our next question comes from Trevor Young of Barclays. Please go ahead. Trevor Young: Great, thanks for taking the question. Can you talk a little bit about the impact either qualitatively or quantitatively that merchants are seeing from their ability to use Facebook and Instagram ad targeting just in light of IDFA we're hearing a lot of noise around this? And I'm just be helpful to hear how it's impacting your merchants and by extension year GMV growth and then how you're adapting to enable that targeted advertising. Thank you. Harley Finkelstein: Thanks Trevor. So I think we mentioned this on previous earnings calls, but just in the near term, we do think it will reduce the efficacy of some ads, but I think it further will incentivize merchants to look for new ways and multiple ways to connect with buyers on top of ads getting increasingly expensive. So, longer term we expect merchants will benefit from further embedding commerce itself into surface areas across the Internet and in person whether that's retargeting or it's Aplek shop, that give more control to the buyer who has actually opted in. Merchants on Shopify have always been resilient, whether it was through the pandemic or through different technological changes and we think they'll continue to be resilient and find ways to connect with buyers. Trevor Young: That's really helpful. Operator: Our next question comes from Matt Pfau of William Blair. Please go ahead. Matt Pfau: Hey guys, thanks for taking my question. Just wanted to ask a question on the impressive point of sale uptake that you're seeing. Do you think that this is more tied to economies reopening and physical stores reopening or is it more driven by some of the product enhancements that you've made around point of sale? Thanks. Harley Finkelstein: No I think a couple of things. So in terms of retail point of sale GMV. We are seeing that it is nearly back to pre-COVID levels as a percentage of overall GMV which again as Amy mentioned on the last question is on a much higher GMV. So, as physical stores reopen and merchants are better equipped with our upgraded hardware and software they're going to sell more. We did roll out also an all new shop by point of sale, with new hardware and integrated payments in places in new geographies like places like Australia and we're making great progress in places like UK and Ireland as well. So we're trying to enable merchants' in these regions to seamlessly bridge their online business and their offline commerce and to Amy's point earlier that they should not be mutually exclusive. We also saw that 63% of our brick and mortar merchants in English speaking geographies are now using some form of local in-store, curbside pickup and delivery solutions that's compared to like 2% at the end of February 2020. So that's part of what we're going to, you see as re-openings continue to happen, but also as retail has been reset through COVID is that it will be retail everywhere and Shopify is a platform that powers retail everywhere, whether it's online or offline. Katie Keita: Thanks Matt. Tobi Lutke: I'm going to just add that phase, just a point, sale product is now very, very good. It was previously, it's most differentiated feature like I said it was attached and rights for the same real-time database as online store, but was very valuable in its own right, but like we really took that product seriously. I think we are going to rewrite and before, at this point it's started just because like there is just is a lot of learning and our initial vertical point of sale of absolutely oriented this, what's the point of sale industry has been doing--but previously like better implementation. I think then--but of existing patents, I think one effect you are seeing in a lot of spaces is that sort of second, third, fourth ways of software and for being more digitally native like, let's actually use exactly what like the power, software power, Internet power of touch devices, in the use case to and you never know exactly what like what they can bring instead of just making touch version of all the text based point of sale system. I'm very, very happy with what the point of sale is, it's really, really ready to be adopted on the platform and I think that is the additional accelerant that to. Operator: Our next question comes from Colin Sebastian of Baird. Please go ahead. Colin Sebastian: Thanks and good morning, everybody. I wonder if you could expand a bit on plans for Shopify Plus maybe where you are focused in terms of product road map to drive more merchant adoption and how much of that is geared towards the enterprise tier versus the mid-market. Thank you. Harley Finkelstein: Thanks for the question. So, I mentioned in my prepared remarks but Q2 was a great quarter for Plus more merchants on standard plans upgraded to Shopify Plus. We also saw more international brands joining Plus to grow their business. In terms of upgrades versus net new, we are seeing--we're seeing both. On the upgrade side was adding more than 700,000 merchants in 2020 that really does feed the pipeline for upgrades and obviously cache in that cases is incredibly favorable. On the net new on the competitive front, it's important to remember the size of our base relative to others, we add more merchants in a quarter than some of the other Enterprise platforms have in total and so the Shopify brand affiliation--It's Shopify Plus brand affiliation keeps getting stronger. It's now easier to make changes quickly, which is something that a lot of merchants want even the largest of merchants and also the total cost of ownership is still lower relative to most others. In terms of the features and functionality we continue to add more functionality. We announced a number of new APIs and new ways that you can actually get into the code base of Shopify and be able to customize it to do exactly what you want that came out at Shopify Unite. So generally Shopify Plus is really becoming a favorite for the mid-market but also for some very large merchants. I've been working on my favorite T-shirt retailer James Perse for about 6 years to migrate over to Shopify Plus and now it was finally the right time for them to do it. So we think that Shopify Plus is really well positioned to keep not only having more homegrown stories migrate from our basic plan, but also migrations from other enterprise platforms in the future. Katie Keita: Thanks, Colin. Operator: Our next question comes from Samad Samana of Jefferies. Please go ahead. Samad Samana: Hi, good morning. Thank you for taking my question. So maybe just on the cross-border side of the business we're wondering if you could maybe share anything around cross border volume is going to Shopify merchants and how we should think about the cross-border opportunity in the installed base, especially with that Globa E partnership. Thank you. Harley Finkelstein: I mean I think commerce in 2021 is cross-border. That's how it operates, you know when in the early days of Shopify you started to sell in your own backyard, in your own country and in your own region that is, that's not the case. And so whether it's with partnerships Globa E or it's more functionality to do currency conversion, things of that nature we think that in order for us to be the platform of choice for the most important merchants and brands in the world they by default need to sell internationally. And we've been working on international, whether it was things like activating new partnerships with new agencies, new developers and different countries to make sure that our product is well localized or if new languages where it's new payment are pushing Shopify Payments into more geographies. We're a global company and our merchants are also global companies. And so the way for us to maintain our position, the leadership position of being the retail operating system for the best brands is to make sure they can sell wherever they want thanks. Operator: Our next question comes from Josh Beck of KeyBanc. Please go ahead. Josh Beck: Thank you for taking the question. What is the triangulate on a couple of the data points you shared? So the social channels seem to have been very strong. It sounds like there are multiples levels types of growth and then point of sale also rebounded close to pre-COVID level. So I'm just curious if you play out b. Both of those trends, say, 3 to 5 years, do you see the social channels starting to approach, maybe the contribution to your business within point of sale. Just curious if you are revisiting that equation on the other side of COVID year. A - : Yeah, listen, I think social channels are becoming increasingly important part of the way commerce is happening and will happen The rank order of our GMV mix continues to be the online store, offline POS as second, and then all social channels and marketplaces third, and the social channels and marketplaces today represent a small percentage of the mix, but growing very rapidly. So it will take some time before it becomes a significant part of our GMV mix. But having said that, I mean I think that's the beauty of Shopify in the multi-channel aspect as we can be anywhere commerce moves to and the future to be flexible on behalf of our merchants in order to provide additional ways to access buyers. And so, I view it as a positive that we have multi-channels and every merchant is going to use those channels in a slightly different way that benefits their business the best. And so our aim over time will be to offer multiple channels that you see today and new ones that are created over time. Katie Keita: Thank you, Josh. Operator: Our next question comes from Paul Treiber of RBC Capital Markets. Please go ahead. Paul Treiber: Thanks very much and good morning. It's a follow-up question on international. Just regard to your international strategy. What priority are you putting on securing additional partnerships or building on your partnerships with local marketplaces in channels and in a bigger picture you, to what degree can you scale and decentralize your support from more marketplaces and channels? Tobi Lutke: Whether it's a place like Europe, Western Europe, for example, place like Germany and France or it's other geographies around the world and APAC, part of making sure that we have a global retail operating system is to make sure that we not only have local partnerships in terms of app partners, theme partners that are building software on top of Shopify that actually is relevant and valuable for merchants in that geography, but it's also making sure that the surfaces that consumers in those geographies want to buy on are integrated to Shopify. So the partnership, strategy around international has always been a part of what we set we were going to do just building software and translating is not sufficient, we also need to make sure that it's properly localized. In some geographies there are marketplaces that in Rakuten, for example, we are integrated within Japan would not be relevant as an as a marketplace in another geography and in Latin America, so that localization actually is really important. And the good news is that because we do demand from merchants in all of these geographies it's becoming easier for us to develop these relationships with both app developers, team developers, but also these marketplace partners. Katie Keita: Thanks, Paul. Operator: Our next question comes from Darren Aftahi of ROTH Capital Partners. Please go ahead. Darren Aftahi: Hey, good morning. Thanks for taking my question. You brought on a lot of merchants as COVID kind of hit last second quarter in that ramp. I'm just kind of curious as we kind of having to go through that, what the sort of sense of retention is amongst those new merchants are brought on. Thanks. A - : Yeah, the retention of the merchants that have been brought on over the past year plus through COVID has actually been very strong, especially the cohorts that came on at the height of COVID especially in the Q3 is the 90-day free trial converted. Those cohorts were more established businesses rushing to get online, the mix was as we've moved through COVID the mix has now shifted back more towards pre COVID levels with a mix of established businesses and entrepreneurs coming to us, but the retention rates have been stronger than pre-COVID levels over the last several quarters. Katie Keita: Thank you, Darren. Operator: Our next question comes from Ygal Arounian of Wedbush Securities. Please go ahead. Ygal Arounian: Thanks, good morning everyone. And what that's about online store 2.0 and the impact of having customizable storefronts, how much of a pinpoint was that the merchants that this was a big focus for you guys. Is it, do you see it more of contributor to Shop Pay plus or overall maybe on the conversion from the base here to Shopify Plus you just talk a little bit more about your expectations on how that can drive merchant growth and retention? Thanks. Tobi Lutke: Yeah. And not that our term, I am not so sure about, there was a lot of things involved into the same thing. I wouldn't put it in terms of that it made anything new possible like that you've mentioned of is launch of a template language which allowed the kinds of people who can design and I see I think going to things to really build any kind of store that is ever great variety comes from and like the reason why Shopify is the stop shop of a store you might use. That is really say hard to tell you that is Shopfiy is still behind that current day on. So that was always the thing that shifted on and thought to is how much of that is possible to do without reaching into code. So it's really a step function on how many people can engage in this branding, customization and dial in the online store just so to tell the story that you want to tell your brand wants to tell. There is now more like a better mix between what the designers and they seem to finally address the ecosystem can do, and what the App ecosystem can do and how they all deliver the extensions to Shopify and then people can pick and choose how they would like to show up, put it altogether together and then most importantly make this all happen fast. So one aspect before that was the challenge is that they open in nature of Shopify like, this is, we give people a lot of rope and some managed to hang on sense of it. There was big, big performance issues that came from a certain app for instance. This is all a little bit more managed now that allows us to monitor this and a lot have conversations with the app ecosystem, about the performance impact of that particular solutions and the new themes that we launched are just extremely fast. In the world of commerce it's quickly loading sites really leads to better conversion. It's a little bit weird to talk about it, but, like if you go in a physical store in a boutique, let's say Squeaky or like, it's just like as we sort of subtle human things about but just kind of make the experience and not good like to slow times are bad on the Internet so been that if you're trying to build a relationship of that's the new business that you have covered. So I meant basically like it's like that's underneath of us 20 to 30 different projects, a lot around edge hosting and new VM's and whatnot, but the interest out of it, it's just, it's now really easy to just show up and what we think is best possible way for the millions of businesses that are on Shopify. So I have answered the question. Katie Keita: Thanks, Ygal. Operator: Out next question comes from Chris Merwin of Goldman Sachs. Please go ahead. Chris Merwin: Okay, thanks so much for taking my question. I just wanted to ask about the adoption of payments among Shopify Plus customers. I think historically they are trying a little bit below what you've seen with core and just curious, are the 3P payment gateways might be helping to this end, thank you. A - : The Shopify Payments adoption for Plus and GPV penetration has continued to increase over time as we've added more value on top of Shopify payments including the accelerated checkout with Shop Pay, as well as multi-currency and other things. So it continues to be a major contributor to the reason why our GPV numbers and penetration have been increasing over time and it's increasing in mix, year-over-year. So that should give you some view it's growing nicely. Katie Keita: Thank you, Chris. Operator: Our next question comes from Brian Peterson of Raymond James. Please go ahead. Brian Peterson: Hi, thank you for taking the question. I don't know if this is for Tobi or Harley, but you announced some big partnership agreements this quarter. I'm curious, what is the North Star for us to think about in terms of partner or build over buy as you guys have scaled, just curious to get an update on that. Thank you. Harley Finkelstein: Well, in terms of, in terms of how we make decision on what to build what to partner with and what to buy. Look, we want to be the most important piece of software that our merchants use. We are that centralized operating system. I think some of the partnerships, you're referring to our work with companies like Google and Facebook for example. Again, going back to what we said beginning at the call commerce is now happening absolutely everywhere and we want to make sure that the merchants that you Shopify can sell absolutely everywhere and the Town Squares of modern day are social media and or on the Internet and are offline as well and they're everywhere, and so it's important that wherever consumers could be potentially looking to purchase that Shopify merchant show up there. And from a merchant perspective they are need feeds back into a centralized back office, where they can run their business. So whether it's Google search or if on Instagram or it's on all the other channel integrations we have that is a really important. Now again over time you're going to see more of these surfaces show up where commerce is happening and it's our responsibility to make sure that we're integrated there to make sure that merchants can access those customers and of course as more of those services come to light that increase the complexity of commerce and running a business, a modern day business and that also increased I think at Shopify provides to customers. In terms of the methodology I mean look, we want to provide what most merchants need most of the time, we want to do that at a world class level and there are some times where it's faster and better and more effective for us to partner with another technology company. We've developed a really good relationship I think in the market for being a company that builds incredible software, and particularly have been really good partners. But there are other times where we just need to build that ourself because it's just mission critical and we think that we can actually deliver the best product on the planet. Katie Keita: Thanks, Brian. Operator: Our next question comes from Keith Weiss of Morgan Stanley. Please go ahead. Keith Weiss: Excellent. Thank you, guys, for taking the questions. And congratulations on a really strong quarter and really be almost all inspiring kind of expansion of functionality. You guys have been able to push into the platform over time. It has been really impressive to watch. I wanted to talk about kind of one of those expansion area, Shopify Fulfillment Network and just trying to get an update on kind of where we are in terms of opening the aperture. Are you guys getting more comfortable with kind of that program and where are we in terms of the timeline of getting more merchants in there, because what we do here in terms of feedback from merchants that are using it is a very positive. It sounds like there's really good feedback on what you guys have put together so far. Harley Finkelstein: I'll sort of that. I mean, I think SFN, we are continuing to build the foundations for SFN. We have been introducing features to help merchants manage product fulfilled on our network. We're also improving shipping speed, we're improving accuracy and we're adding things and managing new preference things like staff notifications. I think there were 3 things that were added in Q2 in particular to SFN which I think are have added a lot of value. One is improved inventory management, now merchants can hide products and variance that are no longer being sold are fulfilled with SFN and so that enables us merchants to keep product and various SKUs organized. The second thing was we improved shipping accuracy and speed. We introduced new tools that validates things like shipping addresses and reduces errors and the 3rd piece is capabilities to manage merchant preferences, I mentioned SAP notifications. But these things all in aggregate all create real value. We also have a better sense of who the SFN target customers are again, we are still in this product market phase. And so we know that self-shippers that are fulfilling between 10 and 10,000 orders a day, durable goods with pick, pack and ship needs and we're brand experience is front and center and they want their brand to look good when the consumer receives that, that is really where we're spending our time right now. The volumes in Q2 were similar to Q1 and we continue to add more merchants to SFN, but again this is still really important project for us. We're still in that product market phase, product market fit phase and over time you'll continue to see more of these functionality come out and more merchants adopt it. But it's important to get this right. Katie Keita: Thank you, Keith. Operator: Our next question comes from Brent Bracelin of Piper Sandler. Please go ahead. Brent Bracelin: Good morning. Question here for Harley on the online versus offline commerce opportunity. That's majority GMV is driven by powering online commerce, but you talked about kind of POS Pro being very robust for quarter of accelerating offline retail GMV, then clearly, there is a blurring of the lines between digital experience customers want online versus offline. I guess, my questions here, what is Shopify doing to capture and enable more offline commerce specifically, is it going to be tied to the POS Pro product, are there new products, you can do the capture more offline commerce, any thoughts there around just the opportunity and how big offline commerce can be given historically, the focus has been on powering online? Harley Finkelstein: Remember that, historically, most business were created offline and then moved online. That's no longer the case anymore. And so by Shopify being the place where more entrepreneurs get started every 28 seconds, a new entrepreneur gets their first sale on Shopify, business are being started online. And by making sure that we are that retail operating system, we keep talking about when they do decide to move offline, if the product is great and as Tobi mentioned earlier, our point of sale product is great and we've spent a lot of time and a lot of money and effort focusing on making sure that that product is, is best in class and so the fact that they start with Shopify that's where their inventory is, that's where they spend their time when they when they go to work in the morning, they open up their laptop, where they start is the Shopify Admin, it makes it a lot easier for us to be their point of sale partner when they decide to transition. In terms of the legacy point of sale market, we are also starting to see more legacy merchants that are starting to offline begin to use Shopify point of sale as well. They're using it because the product is really good but also because every business today, and frankly, for the next, the next 100 years is going to be omnichannel. Talking about omnichannel going forward will be like talking about color television. Every business by default will be omni-channel and Shopify is the platform that enables that. So I think the opportunity for point of sale is there again back to Tobi' comment about the point of sale, hardware and software and the Pro that we put out in less than a while, it's the best we think that's out there right now. It will continue to get better, we'll continue to add more functionality to it, but we think physical retail is a really great opportunity, and to Amy's point, it's our second largest channel and it will continue to grow. Katie Keita: Thank you, Brent. And thanks everybody for dialing in this morning. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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.
