First quarter Shopify stock results for 2021 have shown an increase in revenue growth of 110% compared to last year with profits surging on the back of increased subscriptions and the investment in Affirm.
What is Shopify
Shopify is an ecommerce platform that has benefited from the additional lift in online sales that occurred as a result of the pandemic. The Canadian company has already grown 40-fold in the last five years and expectations had been that growth would slow this year after such a stellar performance. Nonetheless, shares in Shopify rose an additional 10% on the announcement.
Analysts View of Shopify
Analysts have been speculating for months about when the global recovery would slow online spending as consumers returned to more traditional shopping habits, but these results show revenue accelerating for the company for all of geographic locations and for all types of merchants on the platform. Gross merchandise volume (GMV) on the platform (a measure used by the ecommerce industry to measure the total value of goods sold in a given period) doubled from the previous year to reach over $37 billion, although this was largely fueled by countries outside the US, according to the company.
Shopify has said that it does expect some moderation in growth in the coming year, however, as the impact of the pandemic lessens and shops reopen which means customers are likely to return to physical stores rather than shopping exclusively online.
Shopify First Quarter Results
Shopify stock results show it had better than expected revenue and adjusted earnings in the quarter of $988 million (analyst expectations were $863 million) compared with $470 million in the previous year. This resulted in adjusted earnings per share of $2.01 (analyst expectations were $0.77). Net income was also boosted by an $1.3 billion gain in its shares in Affirm Holdings which was listed on the stock exchange in January. The partnership with Affirm, sealed the previous July, resulted in Shopify receiving 20 million shares in the company.
Shopify Partnerships
The Shopify partnerships program, where third-party developers leverage the platform to provide apps and other services, has also contributed to its growth. These partners not only improve the experience for Shopify's existing users but also help bring in new business. Some 16,500 partners referred new merchants to the platform in 2018, for example, with Shopify paying a referral fee to partners for each new merchant that they bring to the platform.
While the company mainly aims to lower the barrier for those wishing to enter the ecommerce space, it also expands its business by relying on its network of 20,000 developers and agencies that help these business as they grow offering tools like inventory management, customer service and data for strategic insights. Participants say that it is not the Shopify platform that is their competitive advantage but rather the partnerships with third party developers.
Shopify (SHOP) Q1 Stock Analysis - Can Shop Stock Continue To Go Higher?