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Shopify’s FY and Q4 2020 results just blew away expectations!

February 19th, 2021

Only a few people expected less:

Shopify Inc. (NYSE:SHOP) released FY and Q4 2020 results that beat expections!

Reported revenue in Q4 jumped to $978 million, up 94% year over year.

Adjusted net income came in at $199 million which translates into adjusted earnings per share that soared 198% to $1.58.

Primarely those results were driven by “merchant solutions” revenue that jumped 117% to $698 million year over year in Q4 but also “subscription solutions” revenue grew an impressive 53% to $279 million.

Operating margin in FY 2020 for the first time swung to 3% from a loss and the sales / free cash flow margin came in at 13%.

And all this happened while Shopify continous to investing heavily in its future!

Shopify continued to build out its “Shopify Fulfillment Network”. 52% of eligible merchants in the United States and Canada already utilized Shopify Shipping in the fourth quarter of 2020.

They launched the all-new Shopify POS, a faster, more intuitive, and more scalable POS software designed to meet the needs of the more complex Brick-and-Mortar retailers and expanded Shopify Payments and the accelerated checkout Shop Pay.

Shopify’s stock was down after releasing these results, because Shopify tried to dampen highflying expectations for FY 2021:

“… the ongoing shift to ecommerce, which accelerated in 2020, will likely resume a more normalized pace of growth.”

But don’t forget that Shopify the past years has always been prudent with its outlook.

Shopify certainly has a bright future given the rapid change of commerce which will continue and the shift to ecommerce accelerated in an unprecedented way by the pandemia which will go on in a more normelized way.

But Shopify’s stock valuation reflects all these optimistic assumptions.

The stock trades at a price/sales ratio of about 56 and a mind blowing price/free cash flow ratio of more than 400!

But Shopify remains the top dog in an at least $78 billion small- to medium-sized business market and we all know how profitable dominant software provider can become over time!

Shopify remains a “buy” whenever there is a pullback in the market!

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