Asmus Puhl Finance Blog

Investors liked Shopify’s (NYSE, TSX:SHOP) Q3 2021 results!

More and more merchants are using the platform even now as the economic environment starts to normalize.

Total revenue in the third quarter was $1,123.7 million, up 46% year over year.
GMV (Gross merchandise volume or all merchandises sold via the platform) for the third quarter was $41.8 billion, an increase of $10.8 billion or 35% over the third quarter of 2020.

Shopify’s cash position grew year over year to $7.52 billion up from $6.39 billion at December 31, 2020.

Shopify is heavily investing in its growth initiatives:

The company launched Shopify Markets, a product that makes cross-border commerce easier for entrepreneurs. Shopify began rolling out Shopify Balance, a money management product for merchants in the United States, introduced TikTok Shopping to merchants and continued the buildout of its fufillment network.

Therefore Shopify’s adjusted earnings per share fell 28% to $0.81.

Shopify’s share trades at a price/sales ratio of 47 and a price/earnings ratio of 76. Certainly a steep price!

But if you believe that the future of e-commerce will not only be in the hands of a few very big players like Amazon but in the hands of many smaller more specialized merchants than Shopify is a clear „Buy“.

Shopify is the „enabler“ of those merchants and still has enormous growth potential.

Shopify Inc. (NYSE: SHOP) released once again record Q2 2021 results!

Shopify believes that last year the formerly distinct industries of retail and online commerce industry have become one only commerce industry!

„Shopify is building the essential infrastructure for this increasingly digital world to allow as many people as possible to participate,” said Tobi Lütke, Shopify’s CEO

Total revenue in the second quarter 2021 reached $1,119.4 million, up 57% year over year and for the first time quarterly revenue exceeded $ 1 billion.

Adjusted net income for the second quarter of 2021 was $284.6 million, or $2.24 per diluted share, compared with adjusted net income of $129.4 million, or $1.05 per diluted share, for the second quarter of 2020.
At the end of Q2 Shopify had $7.76 billion in cash, cash equivalents and marketable securities, compared with $6.39 billion at December 31, 2020.

On their partnership conference “Shopify Unite 2021” the company announced new initiatives and improvements of the platform:

• More flexible and customizable storefronts by the platform upgrade Online Store 2.0
  An improved Shopify Checkout including a new Shopify Payments Platform.
• Continued investments in the Shopify Fulfillment Network.
• The payment system Shop Pay will become available to all merchants selling in the U.S. on Facebook and Google, even if they don’t use Shopify’s online store.

Shopify’ stock today stands at $ 1’550. That means the stock trades at an expensive price/sales ratio of 56.

But management puts the company’s total addressable market at $153 billion. That’s about 45 times Shopify’s $3.4 billion in sales over the last 12 months.

There is a lot of room to grow for this company!

Shopify’ stock is a „buy“!

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!