E-commerce platform Shopify (SHOP) reported stellar second quarter results, posting revenues of $1.12 billion, up 57% YoY; and a huge, record profit of $285 million or $2.25 per share, against $36 million or $0.26 per share during the same period last year, states Todd Shaver, editor of Bull Market Report.
The company also posted significant growth in its gross merchandise value (GMV) at $42 billion, up 40% compared to the second quarter of last year. Shopify attributes this pace of growth to the turmoil and uncertainty surrounding brick-and-mortar commerce, forcing merchants and customers to build an online presence.
As the impact of the pandemic fades, and global economies return to normal, the company expects a more normalized pace of growth compared to 2020, which is consistent with its guidance in February, and is still a significant rate of growth overall.
For the full year, the company expects growth in subscription revenues from new merchants joining the platform, along with sustained growth in GMV both from existing customers and new merchants added to the platform.
Shopify is firing on all cylinders, and there are no signs of it slowing down. It is becoming more of a platform for entrepreneurs to start their companies. With Shop Pay it is entering the payment processing world; Shop Capital helps out small businesses with loans that banks refuse to offer.
Their growing list of merchant solutions, such as Shopify Payments, Shopify Shipping, and Shopify Capital, along with its $1 billion fulfillment network is expected to drive growth over the next few quarters. Analysts at Credit Suisse raised the stock’s price target to $1,700 from $1,400, taking into account its significant competitive moats.
We view Shopify as one of the most well-positioned platforms to benefit from one of the most important investment themes - the intersection of software and payments and the embedding of monetization - and ecosystem-enhancing financial services.
The company is perfectly positioned to dominate the intersection of various trends over the next decade, this includes embedded finance, digital supply chains, and other ecosystem enhancing services.
Shopify is at an enviable position at the moment, and with nearly $8 billion in cash and total debt of only $1 billion, it only gets better.
We added the stock to our model portfolio in 2017 at $73. We remember when the stock traded at 80 times sales. When a company increases sales dramatically this metric comes down.
The company is on a run-rate of about $4 billion now, and with a market cap of $186 billion and the price-to-sales ratio (P/S) is down to 46. If the company does $5 billion in 2022 which is right around the corner, the P/S comes down to 37.
Would we buy it today? Absolutely. Forget what it’s done. Look to what it will do. Our Target Price of $1,500 has been breached and we hereby raise it to $2000 per share.
