Shopify Inc: Best Tech Stock You’ve Never Heard of Up 205% in 2019
Shopify Inc’s Incredible Year Continues
Shopify Inc (NYSE:SHOP) continues to be one of the best tech stocks on Wall Street. It also continues to be one of those tech stocks that no one seems to talk about. Is it simply because the company is headquartered in Ottawa, Canada?
Nevertheless, since the start of 2016, shares in this e-commerce giant have soared by an eye-watering 1,500%. In 2019, Shopify stock has advanced 205%, after hitting a new 52-week intraday high of $409.61 on August 27. In August alone, SHOP stock has surged by more than 21%.
These kinds of advances cannot be ignored.
Why the love for an overlooked tech stock? The numbers don’t lie. As the fastest growing software-as-a-service (SAAS) company, Shopify achieved $1.0 billion in revenue in 2018. (Source: “2018 Year in Review,” Shopify Inc, last accessed August 27, 2019.)
And Shopify has a long history of reporting revenue-beating results. Since 2012, its annual revenues have grown at a compound annual growth rate (CAGR) of 72.4%. Over the same time frame, the company’s monthly recurring revenue has expanded at a CAGR of 70%.
For years, investors on Wall Street have been predicting that Shopify stock’s momentum would come to a grinding halt. That clearly hasn’t happened.
And it appears that the bears are starting to see the light when it comes to Shopify. Just 3.3% of the company’s outstanding shares are shorted.
SHOP Stock Overview
If you’re looking for an underdog story, Shopify has a pretty compelling one. In 2004, the company started out as an online store dedicated to selling snowboard equipment. It could have used existing online marketplaces, but it wanted to build a relationship with customers. (Source: “,” Shopify Inc, last accessed August 27, 2019.
Developing an online store was expensive back in the “dark ages” of 2004. So the company built the tools to develop that platform itself. Shopify sensed that other business owners needed an easy way to either build or transition their services online. They were right.
Shopify officially launched in 2006. Since then, its easy-to-use technology has helped more than 800,000 merchants from around the world generate more than $100.0 billion in sales.
In addition to helping launch businesses, Shopify helps merchants manage every aspect of their enterprise, whether selling online, in retail stores, or on the go.
And clients are happy to pay a monthly subscription fee to do so (from $29.00 to $299.00, all the way up to $2,000 for enterprise companies). Shopify also takes a percentage of every sale made using its online platform.
Some of the company’s bigger customers are Budweiser, Penguin Books, Tesla Inc, Unilever, and Nestlé. But with over 800,000 merchants using Shopify, the company also caters to small business owners around the world. In fact, the vast majority of its clients are small- and medium-sized businesses.
Furthermore, its recently announced “Shopify Fulfillment Network” could help generate billions of dollars in revenue over the coming years.
|
SHOP Stock Information |
|
|
Market Cap |
$44.7 Billion |
| 52-Week Change |
180.7% |
|
52-Week High |
$409.61 |
| 52-Week Low |
$117.64 |
|
Shares Outstanding |
98.9 Million |
| Float |
100.2 Million |
|
50-Day Moving Average |
$344.63 |
| 200-Day Moving Average |
$267.40 |
(Source: “Shopify Inc. (SHOP),” Yahoo! Finance, last accessed August 27, 2019.)
Shopify stock hasn’t just been bullish this year; it has been on a fabulous upward trajectory since the start of 2016. That’s around the time Wall Street said SHOP stock couldn’t keep it up. But it has.
Chart courtesy of StockCharts.com
And Shopify continues to build on its tremendous momentum. The outlook for the second half of 2019 looks just as bright.
Another Quarter of Strong Revenue Growth
On August 1, Shopify announced that its revenue for the second quarter ended June 30 increased 48% year-over-year to $362.0 million. (Source: “Shopify Announces Second-Quarter 2019 Financial Results,” Shopify Inc, August 1, 2019.)
Its subscription revenue was up by 38%, at $153.0 million, while its “Merchant Solutions” revenue was up by 56%, at $208.9 million.
Gross profits came in at $204.8 million, up 50% from $137.0 million in the same prior-year period. Gross profit growth exceeded revenue growth because of new partner pricing terms.
Shopify reported a second-quarter operating loss of $39.6 million (11% of revenue), compared to a loss of $30.8 million (13% of revenue) in the same prior-year period. The company also reported a net loss of $28.7 million ($0.26 per share), versus a loss of $24.0 million ($0.23 per share) in the second quarter of 2018.
Adjusted net income was $15.8 million ($0.14 per share), compared to $2.5 million ($0.02 per share) in the same prior-year period.
Shopify exited its second quarter with $2.01 billion in cash and cash equivalents, compared to $1.97 billion at the end of the fourth quarter of 2018.
Shopify Inc’s Outlook
For the third quarter of 2019, Shopify expects:
- Total revenue of $377.0 to $382.0 million. At the midpoint, that would be year-over-year growth of 40.5%.
- An operating loss of $44.0 to $47.0 million, up from an operating loss of $31.4 million in the third quarter of 2018.
- Adjusted operating income of zero to $3.0 million, compared to an adjusted operating loss of $3.6 million in the third quarter of 2018.
For fiscal-year 2019, the company expects:
- Total revenue of $1.51 to $1.53 billion. At the midpoint, that would be year-over-year growth of 42%.
- An operating loss of $145.0 to $155.0 million, up from an operating loss of $91.9 million in 2018.
- Adjusted operating income of $20.0 to $30.0 million, up from $11.8 million in 2018.
(Source: Ibid.)
Analyst Take
As mentioned earlier, Shopify Inc is a global e-commerce giant.
The reason? Merchants all over the world have come to love the company’s offerings. This is responsible for the company’s rapid revenue growth. Another result is that investors have become more confident in Shopify stock’s long-term prospects.
SHOP stock has trounced every other U.S. Internet behemoth this year, rising more than 205% since the start of January.
Shopify’s shares may be trading at more than 20 times the company’s revenue estimates for 2020—and, like many tech companies, it is yet to report an annual profit—but Shopify continues to attract new customers and has excellent long-term growth potential.
