Shop Stock: Growth in Merchant Base to Aid Shopify’s (SHOP) Q1 Earnings
Shopify Inc. SHOP is scheduled to release first-quarter 2021 results on Apr 28.
Momentum in e-commerce sales triggered by the coronavirus pandemic is expected to have driven Shopify’s first-quarter performance.
Further, gains from roll out of latest 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.
Nevertheless, stiff competition from Amazon, eBay, Square, Facebook’s FB Instagram Checkout, BigCommerce, among others, may have weighed on the first-quarter performance.
Also, 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 first quarter.
Click here to know how the company’s overall Q1 performance is expected to be.
Factors Contributing to Merchant Base Growth
The e-commerce boom led by COVID-19 triggered digitization might have contributed to growth in the merchant base in the first quarter. Small and medium-sized businesses leveraging Shopify’s multiple channel options, amid lockdowns and shelter-in-place guidelines, are expected to have bolstered sales
Robust momentum in the company’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 first-quarter results.
Moreover, the company is well-poised to capitalize on e-commerce boom via rapid uptake of its latest 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 returned 74.8% in the past year, compared with the industry’s rally of 70.2%.
The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Besides 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 first-quarter performance.
Important Metrics to Note
Shopify is banking on its new mobile shopping app — Shop, and strength in applications like Shopify Email, Shopify Plus Admin, Shopify Flow and Shopify Balance to bolster customer engagement in the days ahead.
Shopify Inc. Revenue (Quarterly)
Shopify Inc. revenue-quarterly | Shopify Inc. Quote
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 $85 million and $32.62 billion, indicating year-over-year growth of 53.4% and 87.5%, respectively.
Moreover, the Zacks Consensus Estimate for Merchant Solutions’ revenues currently stands at $566 million, indicating year-over-year improvement of 100.4%.
Additionally, the consensus mark for Subscription Solutions’ revenues is currently pegged at $286 million, suggesting growth of 52.4% from the prior-year quarter.
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