No one would call the coronavirus pandemic a good thing. But it has provided an incredible opportunity for Shopify Inc. (NYSE: SHOP), which helps businesses build cloud-based online storefronts.
Shares in the e-commerce platform provider based in Ottawa, Canada, posted a record-high closing price of $754.38 on Wednesday. That is about a 288% increase over its 52-week low of $262.17.
In May alone, Shopify’s stock price has soared more than 20% and the company, which went public in May 2015, is now the largest in Canada after moving ahead of the Royal Bank of Canada in market value. Shopify has a market capitalization of about $9.6 billion.
Shopify beat first-quarter earnings expectations last week when it reported revenue of $470 million, a 47% increase over its revenue of $320.5 million for the first quarter of 2019. Last year’s figure was a 50% increase over 2018’s first-quarter revenue.
A Determining Factor for Survival
The company had earnings per share of 19 cents, compared with analysts’ estimates of an 18-cent loss per share.
On a GAAP basis, Shopify posted a net loss per share of $0.27, compared to a year-ago loss per share of $0.22. Gross merchandise value for the quarter totaled $17.4 billion, up by $5.5 billion (46%) year over year.
With COVID-19 forcing the temporary closing of many small businesses, Shopify has offered the tools for brick-and-mortar operations to establish online outlets. An online presence could be the determining factor in whether a business survives in this period of chaos.
“The vast majority of people are employed by small businesses, and they struggle the most during a crisis,” Shopify Chief Executive Tobi Lütke said in a statement last week. “The spread of COVID-19 is going to be a tough time for all entrepreneurs. We are working as fast as we can to support our merchants by retooling our products to help them adapt to this new reality. Our goal is that, because Shopify exists, more entrepreneurs and small businesses will get through this.”
90-Day Free Trial for Merchants
To support merchants during the coronavirus pandemic, which suddenly forced millions of people to stay home, the company is offering an extended 90-day free trial, gift card options and information on where to get government funding, among other initiatives.
“Now more than ever, Shopify needs to be there for our merchants, so our focus during these challenging times is to help solve their immediate pain points,” Shopify Chief Financial Officer Amy Shapero said last week. We are well positioned to help our merchants, particularly given the accelerated shift to online commerce. Our strong balance sheet provides us with the flexibility to continue investing in the right merchant-first initiatives, supporting our merchants’ success now and well into the future.”
The company announced on Tuesday that it had completed a stock offering of Class A subordinate voting shares at a price of $700 per share. Shopify raised about $1.5 billion in gross proceeds with the sale of 2.1 million shares.
“Shopify expects to use its net proceeds from the offering to strengthen its balance sheet, providing flexibility to fund its growth strategies,” the company said in a statement.
New App Launched as More Shoppers Go Online
In addition to its online services, Shopify offers businesses a point-of-sale system that tracks sales wherever they happen. And last month it launched a mobile app for shopping.
“Designed to bridge the gaps in online shopping, Shop offers users the ability to easily discover local businesses, receive relevant product recommendations from their favorite brands, check out effortlessly, and track all of their online orders,” the company said in a news release.
The app, called Shop, combines the discovery of local businesses, personalized recommendations, seamless payment and tracking.
Because of social distancing and stay-at-home measures, shoppers have turned to online ordering more than ever before.
Shop offers users the ability to easily discover local businesses, receive product recommendations from their favorite brands, check out easily and track all their online orders.
Even though Shopify is outperforming the S&P 500, the company has suspended its financial expectations for the 2020 fiscal year due to the COVID-19 outbreak.
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