Shopify (NYSE:SHOP) has been at the forefront of empowering entrepreneurs in this tech-driven age to run their own online businesses across all geographies. They have successfully developed tools that meet a growing need, and the market has rewarded this success, driving SHOP stock up more than 125% in the first half of 2019.
For those who have missed out on those gains, fear not. There is good reason to believe that SHOP stock will continue to further expand its outperformance in the second half of the year. Analysts at Canaccord last month said, “In our view, Shopify is getting to point at which breadth of product, vibrancy of partner ecosystem, and general retail scale will enable the firm to pull away at an exponential pace.” That came with a bump in the analysts’ target to $360, “ahead of a more strenuous valuation analysis later this summer,” they wrote in a note to clients.
As I see it, doubling down on revenue streams in capital lending, bolstering its fulfillment network, and the launch of Shopify Studios should drive SHOP stock to the $400 mark.
SHOP Stock Takes a Note From Banks
Lending is a great business. Screen and rank potential borrowers, offer customized loan amounts and interest rates, and you have a recipe for printing money. Shopify has been able to leverage its relationship with merchants to build a capital business, not unlike Square (NYSE:SQ).
Shopify Capital is progressively contributing more to the consolidated top line results. In the first quarter of the year, the unit issued $88 million in merchant cash advances and loans, an increase of 45% year-over-year.
In cumulative cash advanced, Shopify Capital has grown to $535 million since launching just over three years ago (with $107 million outstanding as of the most recent quarter.) SHOP has tapped into a need, and it would be unsurprising to see both the share of revenue contribution continue to grow.
SHOP Could Go Toe-to-toe With AMZN
Shopify recently discussed its plans for a “shopper fulfillment network” that will match Amazon.com (NASDAQ:AMZN) in delivery time. It’s a big step for SHOP, but one that will pay dividends as the company proves that it adds value for its large network of merchants.
In the first quarter, Shopify Shipping adoption rates were already on the ascent, with more than 40% of eligible merchants in the U.S. and Canada using Shopify Shipping in the period. With this next move to shrink shipping times, that rate will undoubtedly increase in the second quarter.
SHOP is making commerce easier, more accessible, and better for everyone and this is proving to be a winning formula.
SHOP Stock Goes Hollywood
Earlier this year, the latest SHOP stock catalyst debuted, with the launch of Shopify Studios, a full-service TV and film content development and production house. The intended goal is to redefine and inspire entrepreneurship through accessible, relevant, and entertaining content, paving the path for future business owners and innovators
It may seem like a ploy to just get into the content game like so many tech companies have been as of late. For SHOP though, there is a more strategic angle.
You have to think about the ecommerce funnel. Conversion is the name of the game. At a micro level SHOP’s job is to convert the interest/browsing into an actual sale. Beyond that, it’s about building a brand so that when people look to buy, they go straight to your platform. This ties into owning an entire ecommerce category.
That’s what the studio initiative is about. It’s the first broad-based marketing campaign of its kind in Shopify history. It has a good shot at driving traffic and brand awareness, which all bode well for SHOP stock.
As of this writing, Luce Emerson did not hold a position in any of the aforementioned securities.