One of the hottest stocks over the past year is still rolling. Shares of Shopify (NYSE: SHOP) soared 12.6% last week, moving higher after posting blowout financial results. A couple of analysts would go on to raise their price targets, a move that has been par for the course when it comes to a stock that has more than tripled over the past year. The stock has popped fivefold since going public at $17 two years ago.
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Shopify is a one-stop shop e-commerce platform for small- and mid-size merchants. Vendors pay as little as $9 a month to be on Shopify, then the dot-com darling gets a small piece of the transactions. It's clearly working for merchants. Gross merchandise volume clocked in at $4.8 billion through the first three months of this year, 81% ahead of where it was a year earlier. The hot stock is proof that it's also working for investors.
Image source: Shopify.
The art of the online deal
Shopify's first quarter was a winner last week. Revenue soared 75% to $127.4 million during the period. Its adjusted net loss narrowed to $0.04 a share for the quarter. Analysts were settling for a deficit of $0.10 a share on $121.6 million in revenue. You can't blame Wall Street pros for underselling Shopfiy's prospects. Shopify's own guidance back in February was targeting just $120 million to $122 million on the top line.
The monster quarter was a combination of a 60% spike in subscription solutions to $62.1 million and a 92% surge in transactions-based merchant solutions to $65.3 million. Shopify has become a well-oiled machine, and it attracted a record number of vendors to its platform during the quarter.
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The good news didn't end in the rearview mirror. Once again, we find Shopify in "beat and raise" mode, pushing its guidance higher. Shopify now sees revenue of $615 million to $630 million for all of 2017. Just three months ago, Shopify was targeting just $580 million to $600 million on the top line.
Wall Street's also trying to catch up. Colin Sebastian at Baird boosted his price target on the stock from $69 to $95, arguing that Shopify's value proposition for merchants has never been as strong as it is right now.Darren Aftahi at Roth Capital bumped his share price goal from $82 to $92. He argues that Shopify will keep pushing its guidance higher as the year plays out, a prediction that isn't so bold when one considers that this is what Shopify has done through most of its two years as a publicly traded company. Aftahi also points out that while some may associate Shopify as a platform for upstart merchants, it's Shopify's largest client additions that are outpacing the rest of its business.
Momentum is clearly on Shopify's side. Whether it's deliberately putting out conservative guidance that it can smash through with ease, or if its fundamentals are just perpetually improving, Shopify is earning its position as a tech stock star.
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