Shopify Posts Exceptional results! Is SHOP a great BUY?!

Shopify

Shares of Shopify (SHOP) were up more than 6% in early trading Wednesday after the e-commerce company released 1Q results that beat analysts’ estimates. Revenue more than doubled as the pandemic fueled a boom in online shopping.

Indeed, Shopify’s revenue came in at $988.6 million for the quarter ended March 31, an increase of 110% from $470 million in the prior-year quarter.

Meanwhile, net income was $1.26 billion ($9.94 per share) in 1Q 2021, an improvement from a net loss of $31.4 million ($0.27 per share) in 1Q 2020. On an adjusted basis, Shopify earned $2.01 per share, up from $0.19 in the prior-year period.

Both revenue and earnings beat expectations by a wide margin. Indeed, according to Zacks Consensus Estimate, Shopify was expected to post adjusted EPS of $0.78 and revenue of $853.04 million.

Shopify generated $320.7 million in subscription solutions revenue, with the growth primarily driven by an influx of new merchants joining the platform and $668 million in merchant solutions revenue, mostly driven by the growth of gross merchandise volume (GMV). GMV was $37.3 billion in the first quarter, up 114% from the previous year.

Shopify’s President Harley Finkelstein said, “Our singular focus is on making entrepreneurship easier and making it easier for entrepreneurs to succeed. Merchant sales growth on our platform accelerated in the first quarter as merchants leveraged our modern commerce technology, which helps them compete in any retail environment and engage directly with their customers wherever they are.”

Shopify’s CFO Amy Shapero said, “Shopify’s momentum continued into 2021 as digital commerce tailwinds remained strong and merchants took advantage of the range of capabilities offered by our platform.”

The company expects strong revenue growth in 2021, but at a slower pace than in 2020.

Last week, Robert W. Baird analyst Colin Sebastian assigned a Buy rating on the stock. He lowered his price target to $1,550 (C$1,924.02) for a 29.8% upside potential.

Sebastian raised his estimates for 2021 following an updated merchant survey and strong e-commerce data in the first quarter. He said he would buy Shopify on any pullbacks.

Overall, the consensus on the Street is that SHOP is a Moderate Buy based on 12 Buys, 16 Holds, and 1 Sell. The average analyst price target of C$1,805.04 implies an upside potential of about 21% to current levels. Shares have jumped by about 70% over one year.

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