Strong growth
Shopify just announced that it expects strong revenue growth into the upcoming holiday season as well. Specifically, it forecasts year-on-year revenue growth at the level of the middle to upper twenty percent, which is a positive signal, as analysts estimated growth of around 23%.[1] These numbers suggest that Shopify is not only exceeding expectations but can maintain momentum even during periods of high demand, when the strength of its platform can be shown.
New strategy with large clients
The company added 16 new enterprise clients in the third quarter. I was interested in this information because it confirms the effectiveness of their new strategic direction. This is because Shopify is shifting from its traditional clientele of small businesses and freelancers towards larger companies with higher order volumes. According to the company's president, Harley Finkelstein, the new revenue was supported not only by growing interest in in-store payment solutions, but also by expansion in European markets and in the business-to-business (B2B) segment.
"Shopify isn't just for small businesses in North America. We are here for all brand sizes around the world," said Finkelstein. This statement reassures me that Shopify is serious about its global strategy and is not afraid to compete with established players in the market.
Record sales and growth in share prices
Proof of their success is a 26% increase in third-quarter revenue, reaching $2.16 billion, beating analysts' expectations of $2.12 billion. It's another reason why I've seen Shopify's stock soar on the stock exchange today – its price has risen by as much as 26% to reach $23.* This movement was their largest intraday increase in more than a year and at the same time the highest price in almost three years. Thus, Shopify sent a strong signal to the market and attracted the attention of investors.
Moving away from logistics to expanding your clientele
It is clear that the company has undergone a significant change in strategy. It has left plans to build its own logistics center, which would allow it to grow by providing broader services to its current customers. I consider this shift to be correct. Without a logistics infrastructure, Shopify needs to look for new customers, and large companies are ideal for this purpose – their orders generate larger volumes and can thus be an engine for further growth.
I also positively evaluate the gross merchandise volume (GMV) data, which is the total value of sales made through Shopify. In the third quarter, this volume reached $69.7 billion, beating Wall Street's projections of $67.8 billion. Such a result tells me that Shopify is gaining a strong position and can be really competitive even in a market where a rival like Amazon is a strong presence.
Conclusion and further potential
In conclusion, I wonder if Shopify could become an even more interesting investment. Strong growth, new income from larger companies and good results in expanding into global markets suggest to me that their shares could continue to be attractive. While the current price already reflects strong growth, I see the possibility of further appreciation in the long term, especially if Shopify can continue to effectively acquire new, large clients and consolidate its position outside of North America.[2]
Shopify proved today that its transformation makes sense, and I'll be watching with excitement as that journey evolves further.
* Past performance is no guarantee of future results.
[1,2] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
