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Shopify: A Canadian Stock Worth More than a Browse

·3 min read

The bounce back has been tremendous for Shopify. Bottoming out at under C$500 at the start of the stock market crash in March 2020, Shopify (TSE:SHOP) has nearly quadrupled its stock price and still has investors asking how much higher it will climb by the end of the year.

One cause for excitement is the recent announcement that Shop Pay, Shopify’s one-click checkout solution, will now be available to merchants selling on Facebook or Google in the U.S. (See Shopify stock chart on TipRanks)

Integrating Shopify solutions with a one-click instant check out to non-Shopify stores operating on Facebook and Google will greatly expand Shopify’s reach even further. Quarterly earnings from April 28, 2021 report $2.01 earnings per share for the quarter, beating most analyst forecasts.

This household name is one of the most expensive Canadian e-com stocks in the market. With a strong indication of immediate growth, the Shop app has tracked more than 430 million orders year to date, according to a company statement.

“Since its launch, Shop Pay has set the standard for the checkout experience facilitating more than $24 billion in orders,” said Carl Rivera, Shopify VP, who heads Shop’s Product for Shop.

Expectations Remain High for Investors

Shopify’s total revenue in the first quarter was $988.6 million. Subscription and merchant solutions account for nearly all of its revenue. Meanwhile, its growth accelerated 110% year-over-year.

The company’s business model is just that, a model for success. Looking at its cost of revenue, Shopify spent $58,382 million on its software subscription solution to make $988.6 million in the first quarter.

Driven primarily by the increase in gross merchandise volume (GMS), merchant solutions revenue was $668 million, with growth accelerating 137%. With a long list of first-quarter business highlights, Shopify has begun to harvest success from its recent partnerships, purchases and optimization strategies.

Analysts' View

According to TipRanks’ analyst rating, SHOP is a Moderate Buy. From 22 analysts, there are 13 Buy and 9 Hold ratings. The average analyst Shopify price target is C$1,859.19 per share with a high forecast of C$2368.92 and a low forecast of C$1,670.71.

Bottom Line

Shopify is the standard for e-commerce solutions. As it ramps up its superior solutions, Shopify's platform is quickly becoming integrated more and more into daily consumer life. Among many key success factors for the company, investors look at Shop Pay as the hope for what the future holds for shareholders. Unmatched solutions such as Shop Pay, which brings a 70% faster checkout experience compared to current e-com, also boasts a 1.72x higher conversion rate, according to Shopify’s analytics.

The company will continue growing expeditiously, and its large cash balance will bring new money to invest. Shopify is not cheap to buy, so investors may think twice when pulling the trigger. As the company scales up, buyers will be paying a very high price for a stock that was four times less nearly fifteen months ago.

If you think Shopify will continue this type of growth, and consider the stock undervalued, you may not be alone. The most challenging part of 2021 for Shopify is keeping up with expectations from analysts and stock holders.

Disclosure: Lukas Brenowitz held no position in any of the stocks mentioned in this article at the time of publication.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.