By Matt McCallAug 03, 2017
Shopify (SHOP) earned a lot of Wall Street buzz this week after shares of the cloud-based e-commerce company surged over $100 for the first time. The rally was the result of an outstanding second-quarter report that included an EPS loss of $.10 ($0.05 better than expected) and an astounding 75% revenue gain over the previous year.
Management also raised their 2017 revenue projection and lowered their expected operating loss, which is now estimated to come in at $7-$11 million (down from $14-$18 million). Shopify is expected to turn a profit in the fourth quarter, with earnings predicted to reach $0.20 a share by 2018 and $1.39 a share by 2020.
That’s the kind of fundamental outlook that can’t be ignored, especially for a company at the forefront of NexGen retail. The shift from brick-and-mortar to mobile and online shopping play right into what SHOP offers its customers – a highly-lauded software platform for businesses to sell products directly to consumers.
The key continues to be expansion. The company already has a high-profile relationship with Amazon (AMZN), and announced earlier this year an integration that allows merchants to sell on Amazon.com from their Shopify stores.
Some of the new names that launched stores with Shopify during the second quarter include Visa (V), Buzzfeed, The New York Times and Frito-Lay. eBay (EBAY) was also recently added as a channel that will be available to buyers later this year. SHOP’s merchant network has now surpassed 500,000 in 178 countries. Add to that an attractive business model that’s based on recurring monthly revenue, and this is one stock that’s worth keeping on your radar as a leader of the online retail mega-trend.
I wouldn’t be a buyer just yet though. Shares are giving back some of their big gains following the post-earnings gap higher, so I’d wait for a further pullback to around $90-$95 before pulling the trigger.
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