It’s time to break down an e-commerce giant. Here is the breakdown on $SHOP, otherwise known as Shopify.
Current Price: $1,407.77
52/Wk High: $1,499.75
52/Wk Low: $305.30
Market Cap: $179 Billion
Read below for the breakdown!
Shopify ($SHOP) is an online platform in which provides the tools for virtually anyone to create, run, and operate an online retail business.
Shopify has been popular for years and growing with common online growth trends, but COVID-19 has put the company into a more exponential growth position.
Furthermore, Shopify boasts partnerships with a strong array of social media platforms including FaceBook, Instagram, Pinterest, and Tik Tok, allowing users to sell to nearly anyone.
Taking a look at Shopify, the stock has continued to move higher, going on a 164% rally in just the last one year, leaving investors asking whether the stock is still a buy.
Digging into the most recent earnings numbers Shopify beat Q4 expectations with an EPS of $1.58, better than the EPS consensus estimate of $1.25. On a year over year basis, EPS improved by 267%.
Revenues also continued their steady climb higher, with revenues totaling $977.7 million in Q4, representing a year over year increase in revenues of 94%.
Breaking down revenues, subscription solutions revenues totaled $279.4 million while merchant solutions revenues totaled $698.3 million, representing a 117% increase on a year over year basis.
Shifting into gross merchandise volume, GMV increased by 99% to a strong $41.1 billion. For comparison, the Q4 2019 GMV level was $20.5 billion.
Gross payments volume (GPV) also saw a significant increase, with GPV totaling $19.1 billion in Q4, much better than the Q4 2019 GPV level of $8.9 billion.
As for profit, gross profit totaled $504.4 million in Q4, representing a strong increase of 91% in gross profit over the Q4 2019 level of $263.9 million.
When it comes to operating income, Shopify reported an operating income of $112.5 million in Q4, much better than the same time 2019 operating income level which resulted in a $30.1 million loss.
Net income saw a significant boost as well, with Shopify’s net income totaling $123.9 million, much better than the small same time 2019 net income level of $0.8 million.
Taking a look at FY 2020, Shopify had an awesome year reporting revenues of $2.9295 billion, representing revenue growth of 86% when compared to FY 2019.
Rounding out full year earnings, Shopify reported a GMV of $119.6 billion (Up 96% YoY) and a gross profit of $1.5415 billion representing a 78% increase on a year over year basis.
Management was positive about Shopify’s performance.
“Our fourth-quarter results capped off an outstanding 2020, thanks to the success of our merchants in a year that truly tested their mettle and triggered more entrepreneurs around the world to start their journey toward economic independence,” CEO Amy Shapero said.
Shifting into the balance sheet the numbers are solid.
Total Debt: $750 Million
Total Liabilities: $1.285 Billion
Total Assets: $7.462 Billion
Cash & Short Term Inv: $6.121 Billion
On a valuation basis, Shopify does trade at a premium.
Price to Earnings: 883.02x
Forward Price to Earnings: 376.45x
Price to Sales: 69.07x
Price to Book: 27.01x
Price to Free Cash Flow: 923.83x
Management has done a solid job as well.
Return on Equity: 6.79%
Return on Assets: 5.68%
Return on Invested Capital: 6.09%
Given the numbers the analysts are bullish with a mean price target of $1,475/share, representing a 4.03% upside.
It is also important to note that the high price target is $1,900/share, representing a 34.05% gain, while the low price target is $1,100/share, representing a -22.39% loss.
The big money is quite involved as well with 65.39% of Shopify being owned by institutions. Top holders include Fidelity Management & Research, Baillie Gifford & Co., and Capital World Investors.
On a technical basis Shopify continues to be bullish. According to the six-month charts the MACD continues to move to the upside within a range of 74.88 down to 66.03.
The six-month charts are also indicating an RSI of 63.63 and CCI of 67.14, both of which are on the high end.
In short, Shopify is a strong company in an industry that will continue to grow. Given Shopify’s consistently growing revenues, excellent management team, and partnerships, the stock continues to be a solid long term investment.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.