Latest news with #ShopifyPayments
Yahoo
14-05-2025
- Business
- Yahoo
Strong Q1 and Nasdaq Listing Signal Bright Future for Shopify Stock (SHOP)
Shopify (SHOP) is firing on all cylinders, recording awe-inspiring results that show zero sign of slowing down. Merchant adoption continues to climb, and Shopify Payments is gaining notable traction. On top of that, the company is generating solid free cash flow as it tightens costs and introduces more high-margin products. To symbolize the company's coming of age, Shopify is set to join the Nasdaq 100 (NDX) and the Nasdaq-100 Equal Weighted Index (NDXE) later this month. Quickly and easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks straight to you inbox with TipRanks' Smart Value Newsletter With global growth, smarter AI tools, and a leaner operation, Shopify looks well-positioned to maintain this momentum. I'm stoically bullish on SHOP stock and have initiated a long position. Shopify's recent earnings report, which included a 27% YoY rise in revenues and a 22% rise in profit, further entrenches my bullish stance. Shopify's Q1 earnings, which the company posted last Thursday, were nothing short of excellent. Quarterly revenues reached $2.36 billion, with Gross Merchandise Volume (GMV) climbing 23% to $74.75 billion, powered by a 32% surge in international GMV and a staggering 109% leap in B2B GMV. Speaking on the post-earnings call, President Harley Finkelstein pointed to Shopify's unified commerce platform (now live in 39 countries) as a magnet for merchants worldwide. Moreover, Shopify Payments penetration hit 64%, up from 60%, processing $47.5 billion, a 31% jump. The numbers tell a broader story. Offline GMV grew 23%, proving Shopify's not just an online play, while Monthly Recurring Revenue (MRR) advanced 21% to $182 million, driven by Shopify Plus and subscription plans. Management noted the platform's adaptability, with AI tools streamlining merchant operations and cross-border trade holding steady at 15% of GMV. All in all, the writing on the wall is that Shopify's multi-channel prowess spreads at a breakneck pace from mom-and-pop shops to global brands. However, besides Shopifty's impressive top-line growth, its profitability metrics were downright dazzling. Gross profit rose 22% to $1.17 billion, with operating income doubling to $203 million for a 9% margin, up from 5% a year ago. Free cash flow stole the spotlight, surging 56% to $363 million, delivering a 15% margin, marking seven straight quarters of double-digit margins. So, beyond growth, we see disciplined capital and spending controls. Indeed, Shopify's cost management deserves applause. Operating expenses as a percentage of revenue declined from 51% in Q1 2023 to 36% in Q1 2025, easing a long-time investor's worry. Stock-based compensation, another sore spot, is projected to stabilize at $120 million for Q2, a fraction of revenues. In the meantime, Shopify Payments has transformed into a cash machine via frictionless transaction fees, translating to ever-rising gross margins. As a rising number of merchants opt to switch to Shopify Payments for their payment processing over time, there is no reason to assume that this trend is set to reverse anytime soon. Shopify's stock slipped post-earnings, which I found pretty surprising given how powerful its momentum was once again proven to be. Now, historically, SHOP's nosebleed valuations, often over 20x sales, kept cautious investors at bay, with shares still 40% below their 2021 highs. But today's setup is rather different. With revenue and profits compounding at a blistering pace, the stock's forward P/FCF multiple of 61x for 2025, falling to 37x by 2027, appears to be downright reasonable given the pace. In particular, consensus forecasts see free cash flow hitting $1.95 billion this year, $2.46 billion in 2026, and $3.20 billion by 2027. Notably, superb free cash flow should open room for capital return prospects, which Shopify hasn't really explored thus far. As the cash pile grows, management could start returning capital via buybacks or even dividends, which could attract a new cohort of investors to the stock. With the company's net cash position already at a considerable $5.3 billion and tons of cash expected to flow in the coming years, I believe this is an ever-growing possibility. Wall Street's outlook on Shopify is relatively bullish, despite the stock lagging in recent weeks. The stock now has a Strong Buy consensus rating, with 24 analysts currently bullish and 8 staying neutral. Notably, not a single analyst is bearish on the stock. SHOP's average price target is $117.35, indicating an upside potential of 12.5% over the coming twelve months. Shopify's imminent Nasdaq listing and superlative performance results indicate an elegant mix of growth and disciplined spending. The company's ability to scale across online, offline, B2B, and global markets while generating robust cash flows showcases a platform built for endurance. Given the constant reinvention and rollout of features, top-line growth is set to remain vigorous for many quarters to come, and the Q2 guidance for growth in the mid-20s indeed confirms this. Wall Street's free cash flow growth estimates further confirm that Shopify's bottom line is also set to snowball. Add the reasonable valuation and net cash position, and Shopify stock forms a highly compelling case. Disclaimer & DisclosureReport an Issue Sign in to access your portfolio
Business Insider
08-05-2025
- Business
- Business Insider
Shopify builds new merchant tools for navigating tariff uncertainty
Shopify has been busy building tools to help its merchants through tariff uncertainty. Executives addressed tariffs directly during the company's first-quarter earnings call Thursday, saying that it had launched a series of new solutions for calculating and collecting duties. "We've shipped a lot, and we focused on areas that we can have a more immediate impact: cross-border trade, making it easier to buy local, duties calculations, and shipping," President Harley Finkelstein said during the call. That includes a website it launched this week that provides AI-driven guidance on US tariff rates based on a product's description and its country of origin. The website cautions users to take it as guidance and to double-check rates with customs officials. In February, Shopify made its duties-collection tool, previously exclusive to users of Advanced Shopify or Shopify Plus, available to all merchants. Merchants using the tool can display and collect duties at the time of checkout. It also lowered the transaction fee for that tool to 0.5%, down from 0.85% for Shopify Payments users and 1.5% for merchants using other payment providers. Finkelstein said the number of merchants using the duties-collection tool doubled between January and the end of March. Shopify also added a filter in the Shop app that allows shoppers to view products made in a particular country and to buy locally. On the shipping front, it launched the ability for merchants to purchase prepaid shipping labels and send products to customers using delivery duty-paid shipping, which essentially means that merchants assume the costs of tariffs and taxes for customers. It also started working with more third-party logistics providers on the Shopify Fulfillment Network app and added features to its managed markets product, which, through a partnership, allows merchants to designate Global-e as the merchant of record rather than the seller itself. "Our obsession with unlocking every opportunity and filling every important gap in the system, to give our merchants the best chance of success, is one of our superpowers," Finkelstein said. "We rolled out the Shop app filter in less than a week, and the duties calculation at checkout update over a weekend. Literally, the weekend after the tariff changes were announced, the team got to work, and by Sunday evening, we were testing it for production," he added. Shopify CFO Jeff Hoffmeister said that cross-border commerce accounted for 15% of the company's gross merchandise volume in the quarter, similar to previous quarters. About half of that cross-border commerce involved trade into or out of the US. He added that only about 1% of Shopify's overall GMV was for items from China that would qualify for the de minimis exemption. "The recent expiration of the de minimis exemption for goods from China is not expected to have a meaningful impact on Shopify in the near term," he said. "That said, this expired less than a week ago, and we will continue to monitor its impact on our business." Shopify reported 27% revenue growth and 23% GMV growth for the quarter. "As the platform that powers global commerce, we're of course monitoring for potential slowdowns, but our data through April shows little evidence of that," Finkelstein said.
Yahoo
03-03-2025
- Business
- Yahoo
Shopify: Increased TAM, but a Valuation That Is Hard to Justify
Shopify (NYSE:SHOP) is a Canadian e-commerce web development platform that serves clients of all sizes. It also offers complementary services such as payment processing, shipments, marketing, and financing solutions. In 2024, the websites that used Shopify as a provider had an estimated market share of over 12% in US e-commerce. Warning! GuruFocus has detected 3 Warning Signs with SHOP. In the market sell-off of 2022, Shopify's stock suffered significantly, dropping approximately -86%. The company overestimated growth prospects during the pandemic and increased operating expenses from 47.97% of revenue to 63.86%, resulting in an FY 2022 net income loss of $3.447 billion. Despite these headwinds, the stock price has recovered significantly, from $25.67 to $110.95, thanks to a strong recovery in revenue growth and margins. Simultaneously, the top line is expected to continue accelerating in the following years as the company cross-sells new solutions and increases its total addressable market. Shopify generates revenue through two methods. One is through Subscription solutions, which are the least volatile and include recurrent revenue from POS terminals, websites, apps, and domain subscriptions. In Q4 2024, Shopify achieved a record $666 million in this category, rising 26.8% YoY. The second is through Merchant solutions, which provide customers with a centralized e-commerce platform to run their online business entirely. Here, Shopify earns from payment processing fees, currency conversion, and working capital lending. Recently, the company obtained $2.146 billion in quarterly revenue, growing 32.5% YoY. Finally, based on what the company has described, the sales volume is affected by seasonality, making Q4 the strongest quarter due to holiday demand, while Q1 is typically the weakest. Source: SHOP IR Shopify has been successful in incorporating every type of client, from solo entrepreneurs who want to build an online store to large enterprises with billions of sales. Simultaneously, the company has been cross-selling other solutions necessary to run an online business, which has allowed the company's financials to grow at double digits and increase its total addressable market. These integrated solutions have increased customers' switching costs, especially on the web development front, as many apps are built exclusively for Shopify. At the same time, accepting Shopify Payments on a website tends to be cheaper than accepting Stripe or PayPal, as Shopify charges an extra fee per transaction, making customers more inclined to use Shopify Payments. Although Shopify Payments (part of Merchant solutions) is driving most of the growth, it certainly has lower gross profits than Subscription solutions due to associated third-party costs and lower take rates. For example, in FY 2024, Subscription solutions had a high gross margin of 81.5% vs. 39.1% from Merchant solutions. As the company has commented, this change in revenue mix is likely to decrease overall gross margins going forward. At the same time, operating expenses continue to weigh heavily on overall revenue due to significant marketing and R&D costs. In FY 2024, OPEX represented 76% of the gross profit. Nonetheless, as the company grows, it is expected for these high expenses to decline as a percentage of revenue, potentially improving bottom-line items. Finally, Shopify has benefited from higher interest rates, where they can earn interest from three solutions Shopify Capital Shop Pay Installments and Shopify Balance The first provides working capital funding to merchants, the second offers buy-now-pay-later solutions to customers, and the third offers merchants a checking account. Over the past two years, interest income has multiplied by 4.1x to $308 million. Yet, due to lower interest rates, this line item will likely decline or experience slower growth in 2025. Source: Author's calculations | 3Y Estimates: GuruFocus Inputting revenue and net income consensus estimates for the next three years, with a cost of equity of 12.6% based on CAPM, provides an intrinsic valuation of $38.4, which makes the actual price of $110.95 extremely overvalued. However, Shopify's valuation has always been expensive on an absolute basis. For example, the price-to-sales ratio and the forward PE are absurd at 16.2x and 76.8x, respectively. Still, the market has soared in enthusiasm, with the company growing revenues for the past two years at an average of 25.9%, even when considering a massive drop in growth rates compared to pre-pandemic levels. WIX Data by GuruFocus At the same time, there is a valuation discrepancy between its closest peer, (WIX), which is also a web development platform targeted towards e-commerce. Clearly, Shopify has been more effective in growing its market share, as displayed below, justifying a higher multiple. Yet, the forward PE of 76.8x is too high vs. the 26.9x of Wix, concluding a strong overvaluation of the stock. WIX Data by GuruFocus Overall, Shopify is a great business with a moat and is likely to obtain a higher return on equity than its costs of capital for many years. The company is becoming diversified in many different ways, and the integrated solutions bring high switching costs to merchants. As the company increases its TAM, the opportunity to grow at high growth rates would likely persist for many years. Nonetheless, the valuation is hard to justify, and in a bearish backdrop, the stock would likely result in large drawdowns, as happened during 2022. At the same time, as most of the gross profits come from financial solutions, the company becomes more economically sensitive, bringing a poor hedge in an inflationary period. Therefore, investors may consider entering the stock with a cautionary approach. This article first appeared on GuruFocus. Sign in to access your portfolio
Yahoo
30-01-2025
- Business
- Yahoo
Shopify: Buy, Sell, or Hold in 2025?
Written by Amy Legate-Wolfe at The Motley Fool Canada Shopify (TSX:SHOP) has been on a wild ride over the past year, and investors are wondering whether 2025 is the time to buy, sell, or hold. The stock has seen massive gains, nearly doubling in the past six months alone! This impressive rally has been driven by strong revenue growth. An improving margin outlook and increasing optimism around Shopify stock's ability to expand beyond small businesses into the enterprise space. However, its valuation remains a major concern, with shares trading at high multiples compared to peers. So, what should investors do now? In its most recent earnings report, Shopify posted a 24% jump in gross merchandise volume (GMV). This is a key metric indicating the total sales flowing through its platform. This marked the fifth straight quarter of GMV growth above 20%, demonstrating Shopify stock's continued strength in e-commerce. Plus, quarterly revenue surged by 26% year over year, while operating income more than doubled from the same period last year. Beyond its recent earnings, Shopify stock's past performance has been defined by explosive growth and adaptability. The company has successfully positioned itself as a dominant player in e-commerce by enabling businesses of all sizes to build and scale online stores. Over the years, it has expanded its ecosystem with Shopify Payments, Shopify Plus, and various artificial intelligence (AI)-powered tools to enhance merchant capabilities. However, its stock has often been volatile, experiencing major drawdowns in 2022 and 2023 before rebounding strongly in 2024. While some investors see this as a sign of resilience, others worry about the long-term sustainability of such price swings. Looking ahead, Shopify stock's future outlook remains positive, but challenges persist. Analysts expect operating income to grow at a compound annual rate of 41% over the next five years. Outpacing many of its competitors. Furthermore, Shopify's focus on enterprise clients could provide more stability and predictable revenue streams. This shift toward larger businesses represents a major opportunity. But also comes with longer sales cycles and higher customer acquisition costs. If Shopify can successfully scale in this segment, it could unlock another wave of growth. Yet one of the biggest concerns for investors is Shopify's valuation. The stock trades at a forward price-to-earnings (P/E) ratio of 80.65, significantly higher than peers 35.7. While Shopify stock has a strong track record of growth, these elevated multiples make it more susceptible to sell-offs if earnings disappoint. Some analysts argue that Shopify's premium valuation is justified given its strong revenue expansion and improving profitability. Meanwhile, others believe the stock is overextended and could face a correction. Another reason investors are optimistic is Shopify stock's increasing use of AI. The company has been integrating AI into its platform to enhance marketing, sales, customer support, and operations, which could help businesses generate more revenue with fewer resources. This AI-driven strategy aligns with broader industry trends and has the potential to boost Shopify's profitability faster than its expenses, making it a compelling long-term growth play. In addition to AI, Shopify is strengthening its logistics and payments infrastructure, further solidifying its moat in the e-commerce industry. The company's ability to offer seamless, end-to-end solutions for merchants gives it a competitive advantage over smaller e-commerce platforms. If Shopify can continue refining these services, it could attract more businesses looking for an all-in-one solution. Ultimately, whether Shopify stock is a buy, sell, or hold in 2025 depends on your investment strategy. If you're a long-term investor with a high-risk tolerance, Shopify's strong growth trajectory, improving margins, and enterprise expansion strategy make it an attractive option. However, if you're more conservative or concerned about valuation, it may be wise to wait for a pullback before entering a position. Those who already own Shopify stock might consider holding on, given the company's positive outlook, while remaining aware of potential volatility. The post Shopify: Buy, Sell, or Hold in 2025? appeared first on The Motley Fool Canada. Before you buy stock in Shopify, consider this: The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Shopify wasn't one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years. Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the 'eBay of Latin America' at the time of our recommendation, you'd have $18,750.10!* Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*. See the Top Stocks * Returns as of 1/22/25 More reading 10 Stocks Every Canadian Should Own in 2024 [PREMIUM PICKS] It's Time to Buy: 1 Canadian Stock That Hasn't Been This Cheap in Years Where to Invest Your $7,000 TFSA Contribution 3 No-Brainer TSX Stocks to Buy With $300 5 Years From Now, You'll Probably Wish You Grabbed These Stocks Subscribe to Motley Fool Canada on YouTube Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy. 2025 Sign in to access your portfolio
