Is Shopify a buy after strong earnings?
It’s time to revisit an e-commerce giant. Here is the breakdown on $SHOP, otherwise known as Shopify.
Current Price: $1,142.94
52/Wk High: $1,499.75
52/Wk Low: $617.01
Market Cap: $142.1 Billion
Read below for the breakdown!
Shopify ($SHOP) is an online platform in which provides the tools for virtually anyone to create, run, and operate an online retail business.
The company started in 2006 eventually growing into the monster it currently is, boasting more than 7,000 employees, over 1.7 million merchants across 175 countries, and roughly $341 billion in total sales.
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.
While Shopify has seen strong growth throughout the year, the stock itself has been strong up until recently, moving over 51% to the upside throughout the past year. On the flip side, Shopify stock has been flat for months, moving to the downside by just over 11% in the past three months.
Digging into the numbers Shopify beat Q1 2021 expectations with an EPS of $2.01, better than the analyst's EPS consensus estimate of $0.73. On a year-over-year basis, EPS improved by 957.89%.
Revenues improved significantly as well, with revenues totaling $988.6 million in Q1, representing 110% revenue growth on a year-over-year basis. For reference, the Q1 2020 revenues level was $470 million.
Breaking down revenues, Subscription Solutions revenues totaled $320.7 million (up 71% YoY) while Merchant Solutions revenues totaled $668.0 million (up 137% YoY).
Monthly recurring revenue (MRR) improved significantly as well, increasing to $89.9 million from $55.4 million, representing a strong 62% improvement on a year-over-year basis.
Shifting into gross merchandise volume (GMV), Q1 GMV totaled $37.3 billion, representing 114% growth in GMV on a year-over-year basis. As for gross payments volume (GPV), Q1 GPV jumped to a strong $17.3 billion, representing 46% of GMV compared to 42% in Q1 2020.
Profits also improved, with gross profit dollar growth increasing to a stronger $558.7 million from $257.0 million, representing 117% growth in gross profit dollar. Adjusted gross profit also jumped, increasing by 114% to $565.1 million.
Income improved as well, with operating income increasing to $118.9 million from a loss of $73.2 million in Q1 of 2020. Net income increased as well, increasing to $1,258.4 million from a net loss of $31.4 million in Q1 2020.
Shifting into guidance, management did not provide specific guidance but guided for strong revenue growth throughout 2021.
Management was upbeat.
“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,” CFO Amy Shapero said.
Shifting into the balance sheet the numbers are solid.
Total Debt: $909 Million
Total Liabilities: $1.683 Billion
Total Assets: $10.825 Billion
Cash & Short Term Inv: $7.872 Billion
On a valuation basis, Shopify does trade at a premium.
Price to Earnings: 89.58 x
Forward Price to Earnings: 239.86x
Price to Sales: 42.98x
Price to Book: 15.41x
Price to Cash Flow: 27.30x
Management has been effective.
Return on Equity: 26.42%
Return on Assets: 22.52%
Return on Invested Capital: 23.82%
Given the numbers the analysts are bullish with a mean price target of $1,482/share, representing 29.86% upside.
The high price target is $1,900/share, representing a 66.24% gain, while the low price target is $1,100/share, representing a -3.76% loss.
The big money is quite involved as well with 64.66% of Shopify being owned by institutions. Top holders include Fidelity Management & Research, Baillie Gifford & Co., and Capital World Investors.
On a technical basis, Shopify could be presenting opportunity. According to the six-month charts, the MACD recently crossed back to the downside within a tight range around 1.12.
The six-month charts are also indicating an RSI of 47.59 and CCI of -93.0581, both of which are on the lower end.
In short, Shopify ( $SHOP ) is a strong company with expanding revenues, a solid management team, an efficient platform, and a bevy of major partnerships.
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Disclaimer: This is not direct financial advice, simply an opinion based on independent research.