Shopify: stock market correction versus long term view!
Shopify’s (NYSE:SHOP) share price yesterday fell more than 13% together with other online retail and digital payment stocks after Pfizer and BioNTech released coronavirus vaccine news.
It is understandable that investors want to lock in gains they made year to date. Even after this correction shares of Shopify surged 127% this year!
But should they ignore long term trends? The coronavirus pandemic only accelerated economic and technological trends that existed before and will continue after the pandemic.
So perhaps this is a good moment to look at Shopify’s Q3 2020 financial results:
Shopify grew revenue 96% and gross volume merchandise (GMV) which is all what is sold by merchants on Shopify’s platform, grew 109% year over year!
These are incredible numbers: “The accelerated shift to digital commerce triggered by COVID-19 is continuing“, said Shopify’s president Harley Finckelstein.
And don’t forget that this year we most probably look ahead to the biggest online shopping holiday season ever!
The company also signed up a record number of merchants to its premium-level plan for high volume merchants called Shopify Plus like p.e. luxury brand Dior.
Q3 2020 was Shopify’s second profitable quarter: Net income for Q3 2020 was $191.1 million, or $1.54 per diluted share, compared with a net loss of $72.8 million, or $0.64 per basic and diluted share, for Q3 2019.
Shopify also fortified its balance sheet this quarter: at September 30, 2020, Shopify had $6.12 billion in cash, cash equivalents and marketable securities, compared with $2.46 billion on December 31, 2019.
To fund its growth and new initiatives the company raised additional cash with a stock offering of 1.265 million shares, bringing in $1.12 billion, and a convertible note equivalent to $920 million.
It is almost certain that Shopify’s long term growth trend will continue. After yesterday’s pullback the stock is still valued at a price/sales ratio of more than 50.
That is not cheap but considering the growth potential Shopify today is a buy!