Posted on August 2nd, 2021
Shopify, Inc. (SHOP) saw positive growth over the past fifteen months and significantly outperformed the S&P 500, rising by approximately 283.6% as of July 30, 2021, compared to the S&P’s gain of about 36.8%. Shopify achieved a rank of thirteen on the WhaleWisdom Heatmap as of March 31, 2021, up from its previous rank of twenty-one.
Shopify is a global company specializing in commerce infrastructure, providing an e-commerce platform and tools for online stores and retail point-of-sale (POS) systems. Shopify earns subscription fees through customers using its SHOP platform to set up a store online and market and sell their products. Shopify’s merchant customers may also sell in physical locations by using the Shopify POS application.
While the company briefly saw growth slow in early 2020 due to worldwide pandemic-related shutdowns, the business quickly rebounded. Consumers’ habits shifted heavily towards online shopping during the peak of the coronavirus pandemic. That momentum remained even after government restrictions lessened and physical retail space reopened. Convenience and newly established routines are likely reasons why many consumers have not returned to pre-pandemic shopping habits.
Hedge Funds Remain Bullish
Hedge funds have been bullish on the stock, and institutions are also buying. The aggregate 13F shares held by hedge funds increased to about 26.7 million from 22.8 million in the first quarter, a change of approximately 17.1%. Of the hedge funds, 45 created new positions, 103 added to an existing holding, 30 exited, and 81 reduced their stakes. Overall, institutions were buying and increased their aggregate holdings by about 3.0% to approximately 73.9 million from 71.7 million.
Positive Multi-year Figures
Analysts expect to see earnings rise modestly in 2021 and 2022 to an estimated $6.52 per share and $6.59 per share, respectively. Revenue estimates are encouraging, increasing to approximately $4.6 billion predicted for December 2021 and $6.2 billion for December 2022. The 13F metrics between 2015 and 2021 demonstrate that Shopify’s investment potential remains on an upward trend.
Strong Financial Results
Shopify realized second-quarter solid results, with subscription solutions revenue up 70% year-over-year to approximately $334.2 million. Consumers are still spending, and Shopify reported that they built on the momentum by making significant updates to their platform infrastructure, growing their portfolio, and expanding strategic partnerships. The company saw an increase in merchants joining its platform. Existing merchants could also extract more significant benefits from Shopify’s e-commerce platform and tools.
Overall, there is a positive outlook for ongoing demand for Shopify’s commerce services. Shopify benefited from pandemic lockdowns and consumer shifts to online shopping and continues to see increased demand and more robust digital commerce trends than in pre-pandemic days. Shopify’s impressive 2021 earnings to date and future revenue estimates should be appealing factors for investors.