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Shares of e-commerce specialist Shopify Inc. (NYSE:SHOP) are trading at all-time highs. A 200% plus rally since the start of the year affirms the amount of love the company continues to receive on Wall Street amid the pandemic. The rally has come at the backdrop of the COVID-19 epidemic, presenting a perfect business opportunity that continues to affirm long-term prospects and growth metrics.
A blow-out second-quarter financial results all but affirmed initial estimates that Shopify is in for an impressive year when it comes to earnings and value generation for shareholders. Therefore, it does not come as a surprise that investors have continued to jostle for opportunities on each pullback in the market.
The stock is currently trading at all-time highs and in a steep uptrend underscoring the strong bullish momentum. A rally to highs of $1,117 has come on a huge turnover of traded shares, affirming strengthened investor confidence. Similarly, pullbacks have turned out to be support levels from where bulls have come in and continued to push the stock higher.
About Shopify
Shopify is a cloud-based multi-channel company that specializes in providing a multi-channel commerce platform that allows small and medium businesses to do business online. Its platform provides a single view of business in various sales channels.
Why is Shopify Trading at all-time highs?
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COVID-19 Fuelled E-commerce Opportunity
Shopify has taken the market by storm in 2020, exploding to record highs and showing no signs of slowing down. Investors have continued to push the stock higher on the company, becoming one of the key beneficiaries of the e-commerce trend taking over the retail sector.
COVID-19 has changed the way people do shopping. Amid COVID-19 fears, consumers have resorted to doing shopping online and having items delivered at their doorstep. Similarly, Shopify is one of the company's benefiting a great deal from the new trend thanks to its platform that provides merchants a single view of business and customers across various sales channels.
With the e-commerce market poised to increase from $3.5 trillion as of 2019 to $6.5 trillion by 2023, the addressable market is enormous, presenting a unique opportunity for growth. Likewise, Shopify has moved to strengthen its competitive edge and position by scaling operations to take advantage of the tremendous market opportunity.
As more merchants flock into the Shopify platform, the company is well-positioned to benefit from industry growth. Similarly, investors have taken note of this fact thus betting big on the company.
Analysts Ratings
Analysts have already initiated coverage of the stock with most reiterating ratings that underscore further growth. Atlantic Equities, for instance, has an 'overweight' rating on the stock. According to the equity firm, Shopify is under-monetized significantly with product extensions, fulfillments expected to provide further upside opportunity.
Revenues and Earnings Growth
In addition, the coronavirus pandemic continues to accelerate Shopify growth metrics as depicted by gross merchandise volume surging to $100 billion. While revenue did grow 47% in 2019, leading to a $1.6 billion in top-line growth, 2020 looks set to be a record-breaking year.
With e-commerce poised to deliver double-digit growth amid changing consumer shopping patterns, Shopify stands to benefit a great deal on powering the fast-growth direct to the consumer economy.
Earnings growth is another factor that affirms why Shopify is trading at all-time highs. The e-commerce company had a blow -out second-quarter as it continued to fire on all cylinders. In the wake of stay at home policies driving consumers to shop online, the company registered record platform sales with the value of goods sold growing 119% year-over-year to reach record highs of $30 billion.
The quarter also marked the highest penetration of Shopify payments, with the firm registering a 132% gain in payments collected. The increase indicates that merchants are becoming increasingly embedded in the Shopify ecosystem.
The fact that more merchants signed for Shopify premium subscription indicate how the company is resonating well with online merchants. The growth also shows the incredible value that the platform continues to bring to merchants and customers of all sizes.
Likewise, the company raked in $57 million in monthly recurring revenues from subscription fees as a record number of merchants signed in.
A 97% year-over-year increase in second-quarter revenue to record highs of $714 million affirms the robust underlying growth that the company continues to experience. Even as revenues scaled to all-time highs, operating costs as a percentage of revenue decreased significantly from 57% to 37% helping support bottom-line growth.
Bottom Line
A blow-out second quarter at the back of an e-commerce trend that continues to experience growth affirms why this growth company is on a roll. Shopify is in for what is arguably its best year as it continues to fire on all cylinders.
The company is well poised to capitalize on the e-commerce boom as more new merchants continue to sign to the fulfillment network. Increasing investments in robotics and fulfillment technology capabilities all but affirms long term prospects.
Shopify looks set to continue powering high as underlying fundamentals continue to improve.
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