Shopify Inc
.
SHOP
is scheduled to release fourth-quarter 2020 results on Feb 17.
Momentum in holiday sales triggered by the coronavirus pandemic is expected to have driven Shopify’s fourth-quarter performance.
Moreover, gains from roll out of new solutions including Shopify Balance and Shop Pay Installments, which are aimed at enabling merchants to offer seamless payment options to customers, might get reflected in the to-be-reported quarter’s results.
However, stiff competition from Amazon, eBay, Square,
Facebook
’s
FB
Instagram Checkout, BigCommerce, among others, may have weighed on the fourth-quarter performance.
The company’s increasing investments on product development, fulfillment network, infrastructure and international expansion to maintain competitive position in the e-commerce market are likely to have limited profitability in the fourth quarter.
Click
here
to know how the company’s overall Q4 performance is expected to be.
Factors Likely to Have Bolstered Merchant Base
Solid momentum in Shopify’s easy-to-use upgrades and new merchant-friendly applications amid evolving retail environment is anticipated to have aided Shopify expand merchant base. This may have bolstered adoption of Shopify Payments, Shopify Capital and Shopify Shipping solutions, which in turn is expected to get reflected in the fourth-quarter results.
The e-commerce boom led by COVID-19 triggered digitization might have contributed to growth in the merchant base, pertaining to small and medium-sized businesses with multiple channel options, amid lockdowns and shelter-in-place guidelines.
Besides, the company is well-poised to capitalize on e-commerce boom via rapid uptake of its new point of sale (POS) software — Shopify POS. The software’s enhanced features are likely to drive its adoption among brick-and-mortal retailers.
Evidently, an expanding merchant base has been instilling confidence in the stock. Shares of Shopify have soared 174% in the past year, significantly outperforming the
industry
’s rally of 38.4%.
The company currently carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Moreover, integrating Shopify platform with sales channels from TikTok, Facebook shops,
Walmart
’s
WMT
Walmart.com and
Pinterest
PINS
, to enable merchants expand sales and broaden business avenues, is expected to have driven new buyer traffic to their stores. Also, initiatives aimed at international expansion may have contributed to the fourth-quarter performance.
Markedly, on Dec 1, Shopify announced that brands on its platform witnessed sales of $5.1 billion, indicating year-over-year improvement of 76% over Black Friday/Cyber Monday 2020 weekend. Also, on Nov 28, the company declared that independent and direct-to-consumer brands on its platform achieved $2.4 billion worth of worldwide sales on Black Friday, indicating year-over-year growth of 75%. Strong holiday sales are expected to have driven Shopify’s fourth-quarter performance.
Key Metrics
Shopify is banking on its new mobile shopping app — Shop, and applications like Shopify Email, Shopify Plus Admin, Shopify Flow and Shopify Balance to bolster customer engagement in the days ahead. Notably, Shop app integrates features from both Shop Pay and Arrive and enables customers to easily discover local businesses, receive relevant product recommendations, check out effortlessly, and track all of their online orders.
An expanding merchant base is likely to have bolstered Gross Merchandise Volume (GMV) and Monthly Recurring Revenue (MRR) metrics and hence, revenues from Merchant Solutions and Subscription Solutions, respectively.
Notably, the Zacks Consensus Estimate for revenues from MRR and GMV currently stands at $74 million and $38.21 billion, indicating year-over-year growth of 37.3% and 85.5%, respectively.
Moreover, the Zacks Consensus Estimate for Merchant Solutions’ revenues currently stands at $639 million, indicating year-over-year improvement of 98.4%.
Additionally, the consensus mark for Subscription Solutions’ revenues is currently pegged at $262 million, suggesting an improvement of 43% from the prior-year quarter.
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