Why The Shopify Stock (SHOP) Price Jumped Today

By Amit Chowdhry ● July 29, 2020
  • Today Shopify Inc (NYSE: SHOP) traded at above 7%. These are the reasons why.

Today Shopify Inc (NYSE: SHOP) is trading at above 7%. And the stock price hit an all-time high of about $1,045. A major reason why the stock price grew is due to the second-quarter results, which smashed analyst estimates.

“The world is changing fast,” said Shopify CEO Tobi Lütke. “With the rapid shift to online commerce, massive disruption to conventional employment, and growing conviction that opportunity needs to be more evenly distributed, entrepreneurship has never been more important. With all of these changes, our core principles remain the same: everything we ship is designed to lower barriers to entrepreneurship and reduce friction wherever we can.”

Shopify saw $714.3 million in revenue for the quarter and that is well above analyst estimates. Analysts were expecting about $200 million less than that, according to Fool.com.

“The strength of Shopify’s value proposition was on full display in our second quarter,” explained Shopify CFO Amy Shapero. “We are committed to transferring the benefits of scale to our merchants, helping them sell more and sell more efficiently, which is especially critical in this rapidly changing environment. With our strong balance sheet and through prudent capital allocation, we remain well positioned to continue solving critical pain points for our merchants and contribute to their success for years to come.”

Shopify also saw a major acceleration of growth, largely due to the increase to e-commerce. Revenue for the second quarter jumped 97% YoY and the company saw a 119% YoY increase in GMV. The new online stores created on Shopify’s platform during the period jumped 71% YoY.

Merchant solutions revenue jumped for the third successive quarter as it went up 148% year over year. And subscription solutions grew 28%. Plus the monthly recurring revenue went up 21%.

However, COVID-19 significantly influenced online store creation and consumer spending. And the duration of its future “remain uncertain in view of the greater likelihood of an extended global recession.” So Shopify is not providing a financial outlook for Q3 2020 or for FY 2020.

GMV from point-of-sale channels dropped 29% sequentially. Why? Many Shopify retailers with physical stores had to be shut down during the quarter due to the pandemic.

After the market closed on Tuesday, Shopify unveiled a plan to raise $7.5 billion. This was revealed in a mixed shelf registration offering with the Securities and Exchange Commission (SEC) — which gave Shopify the right to sell a variety of securities, including Class A shares, preferred shares, debt securities, warrants, subscription rights, and units.

As of the end of June 30, 2020, Shopify had $4 billion in cash, cash equivalents, and marketable securities, compared to $2.46 billion on December 31, 2019. This increase reflects $1.46 billion of net proceeds from Shopify’s offering of Class A subordinate voting shares in the second quarter of 2020.

Disclosure: I own a small number of Shopify shares in my portfolio.