Shopify Could Own Black Friday -- Heard on the Street
By Laura Forman
Talk about being in the right place at the right time.
Amid the Covid-accelerated shift from brick and mortar stores to
online shopping, cloud commerce platform Shopify Inc. continues to
clean up. After a huge second quarter which helped propel the
company to its stratospheric $125 billion market value, Shopify's
latest results suggest it might just be getting started.
Third-quarter revenue grew by 96% year-over-year, handily
beating analysts' estimates, while gross merchandise volume
continued to grow by over 100%. Monthly recurring revenue was
especially strong in the quarter, bolstered by merchant conversions
from free trials earlier in the year. Shopify said it saw a record
number of merchants become paid subscribers in the quarter, even
excluding those who converted following 90-day free trials.
Despite the strong quarter, management didn't provide fourth
quarter guidance, noting its results will depend on "particularly
fluid" variables such as unemployment, fiscal stimulus and the
magnitude and duration of the pandemic, all of which it said could
impact shop creation and consumer spending. Shopify shares fell
slightly in early morning trading, despite the strong beat, but are
up over 160% this year.
Investors shouldn't fret. With another pandemic wave already
hitting the U.S., the fourth quarter holiday season should be
Shopify's for the taking as consumers steer clear of physical
shops. The company said it has already seen evidence that the
traditional Black Friday/Cyber Monday weekend is extending and
"becoming an entire season."
It expects most consumers to do the majority of their holiday
shopping online this year. While that could lead to some supply
chain and logistics constraints, order delays are something both
consumers and retailers have already become well accustomed to this
deep into the pandemic. Monthslong delays for delivery of Peloton
hardware, for instance, certainly haven't hurt its demand or its
Citi Research analyst Walter Pritchard noted that, while the
outlook for Shopify remains unclear, Wall Street's estimates
"likely have a long way to come up," given the company's sustained
pace of merchant additions and revenue growth. Indeed, despite
Shopify's recent growth, the market opportunity continues to look
vast: Shopify says last year it accounted for just under 6% of U.S.
retail e-commerce sales compared with Amazon at roughly 37%.
With shares down slightly for a change, investors should take
advantage of the sale while it lasts.
Write to Laura Forman at email@example.com
(END) Dow Jones Newswires
October 29, 2020 11:58 ET (15:58 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.