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Shopify (SHOP) Strengthens Platform With New Delivery Network

Zacks Equity Research

Shopify Inc. SHOP made a slew of announcements at its annual partner conference, Shopify Unite, with the focus being on enhancing business processes for its merchants.

The company rolled out Shopify Fulfillment Network in the United States, for the first time, to facilitate commerce. The eligible merchants can avail benefits of the network by signing up for early access.

The distributed fulfillment network utilizes robust machine learning (ML) driven inventory-allocation technologies to empower merchants to avoid additional shipping charges. By ensuring optimized utilization of space and time, merchants can manage inventory and stock accordingly. Moreover, consumers can avail quicker delivery.

Following this news, shares of Shopify advanced 7.5% in the yesterday’s trading session. Notably, the stock has returned a whopping 136.2% year to date, significantly outperforming the industry’s rally of 11.5%.

 





We believe the company’s strategically evolving commerce platform to address the merchants’ market reach with innovative initiatives is instilling confidence in this Zacks Rank #2 (Buy) stock.

Other Noteworthy Announcements Boost Optimism

The company rolled out the “all-new Shopify Plus” to enable enterprise merchants in expanding business. This is expected to bolster adoption of Shopify Plus, in turn driving top-line growth in the days ahead.

Moreover, the company unveiled new Shopify POS — point of sale software — to enable retailers in expanding brick-and-mortar business. The latest POS is scheduled to be “available later this year” and will provide access to the company’s POS app extensions. It is loaded with innovative customer service shortcuts and easy-to-use interface features to boost business.

Shopify POS can be used with the company’s new retail hardware offerings which include Retail Stand, and, Tap & Chip Reader, to enable merchants in providing enhanced retail experience to customers.

In a bid to make the platform more merchant friendly, Shopify rolled out new payment and shipping capabilities. Moreover, the company rolled out new store design experience to boost online shopping. Merchants can display their products in 3D and video models by leveraging the new design.

Shopify has been working on extending language capabilities beyond English lately. The focus on local languages is helping in bolstering international presence. At Shopify Unite, the company announced availability of local language capabilities in Hindi, Danish, Dutch, Simplified Chinese, Traditional Chinese, Finnish, Norwegian, Korean, Thai, Swedish, and Malay, taking total languages accessible to 19. Notably, Shopify platform already includes English, Brazilian, Portuguese, Japanese, German, Spanish, French, and Italian language capabilities.

We believe this inclusive move will boost engagement and consequently increase adoption going forward. In the first-quarter earnings release, management noted that more than 0.1 million merchants utilize the platform in languages other than English, which is major driver in this regard.

Wrapping Up

Shopify is benefiting from diversified expanding merchant base and rapidly growing penetration in international markets. The company continues to launch a number of merchant-friendly applications to meet the requirements of a dynamic retail environment, in turn bolstering merchant base.

We believe that the massive growth in e-commerce spending bodes well for Shopify. In fact, market research firm eMarketer estimates global retail e-commerce sales (excluding travel, restaurant and event ticket sales) to grow 15.1% year over year to reach $605.3 billion in 2019, accounting for 10.9% of total retail spending worldwide.

The company’s cloud-based platform is well-positioned to address the growing needs of merchants at a time when social media, mobile devices and data analytics are transforming the e-commerce market place.

Other Key Picks

Some other top-ranked stocks worth considering in the broader sector are eGain Corporation EGAN, Rosetta Stone Inc. RST and j2 Global, Inc. JCOM, each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for eGain, Rosetta Stone and j2 Global is pegged at 30%, 12.5% and 8%, respectively.

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