After a 191% increase in stock price in 2020, it’s hard to imagine that anyone would need yet another reason to like Shopify (NYSE:SHOP). But Shopify stock isn’t through growing yet.
The Canadian e-commerce company has been a superstar for investors so far this year. This is likely due to small retail companies hastily expanding their online sites in response to the novel coronavirus.
Even though Covid-19 vaccines are starting to roll out to patients in the U.K., Canada and the United States, those retailers are going to continue to maintain their online portals in 2021.
In turn, that bodes well for Shopify stock. And a deal the company made earlier this month will be yet another headwind for SHOP stock heading into the new year.
Shopify and Stripe
On Dec. 3, privately held Stripe introduced Stripe Treasury, which will work some of the world’s biggest banks to provide bank accounts and other products to online merchants and vendors that use Stripe’s platform to process payments.
So, why is this important for Shopify?
Because Stripe, at the same time, also announced that Shopify would be a new customer for Stripe’s banking services. Shopify will use the Stripe Treasury platform to offer Shopify Balance accounts to merchants that use the Shopify platform.
That’s a great deal for Stripe, as there are potentially hundreds of thousands of merchants that have access to the Shopify Balance program.
And it’s a good deal for Shopify as well.
“We’re excited to partner with Stripe to provide our merchants with critical financial tools and products for their banking experience, specifically designed for their businesses’ financial needs,” said Tui Allen, Shopify’s senior product lead for banking.
Shopify Stock at a Glance
E-commerce stocks have been big winners in 2020. But when it comes to Shopify, its a little different flavor when you’re looking at the space.
Instead of being a portal that people can search and buy products, Shopify’s platform works seamlessly within the portals of its business customers. As a consumer, you’re never going to type Shopify’s website into your search browser. But you’ll be much more inclined to look up the website of a local sporting goods store, furniture store or specialty clothing store and shop.
With Shopify, small businesses get turnkey solutions that allow them to go online inexpensively, while maintaining their own identity. Shopify also has products to allow businesses to integrate their digital and in-store operations, as well as their point-of-sale payment hardware.
And it works. Over Black Friday/Cyber Monday, Shopify merchants reported selling $5.1 billion in goods. That’s a huge increase from 2019, when Shopify merchants sold only $2.9 billion on those days.
Moreover, in October, Shopify posted third-quarter earnings and sales that topped analysts’ expectations. Revenue was $767.4 million for the quarter, versus analysts’ expectations of $657.8 million.
Adjusted earnings for the quarter came in at $133.2 million, or $1.13 per share. A year ago, the company reported a loss of $33.6 million and a loss of 29 cents per share.
Additionally, subscription revenue rose by 48% on a year-over-year basis to $245.3 million. That said, the company attributed to more merchants joining the Shopify platform. Shopify also said monthly recurring revenue from ongoing customer service subscriptions was $74.4 million at the end of September.
Overall, Shopify didn’t provide guidance for the fourth quarter. But the company said it anticipated more revenue from businesses that are making the transition to online sales.
And that’s a good bet.
The Bottom Line
Collectively, when I was assembling my list of top tech stocks to buy for the holidays, Shopify stock was a no-brainer to include on the list. Shopify is already seeing increased revenue over last year in holiday shopping.
When fourth-quarter and full-year numbers for 2020 are released early next year, Shopify will put the cherry on its best-ever year. But investors should be content to know that the company — with efforts such as Shopify Balance — is continuing to look for ways to monetize the e-commerce trend.
Shopify stock gets a well-deserved “A” rating and carries a strong buy recommendation in my Portfolio Grader.
On the date of publication, Louis Navellier had a long position in SHOP. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system —with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.