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The holiday season is fast approaching, and many businesses typically experience heavy activity from December 20 to January 3 of the following year. The largest publicly traded company on the TSX, Shopify (TSX: SHOP) (NYSE: SHOP), could be on fire down the home stretch. Should investors include the tech superstar on their year-end shopping lists?
Milestone after milestone
Many Canadians have made their fortunes on Shopify since its IPO. Over the past three years, the total return for Tech Stock is 899.91% (114.99% CAGR). Last year, the $ 226.96 billion e-commerce platform surpassed Royal Bank of Canada as the most valued company on Canada’s main stock exchange.
When the TMX Group launched TSX30 listing, its inaugural flagship program, in September 2019, Shopify placed second behind Canopy growth. In the second edition in 2020, the technology title won the first place. This year he slipped to second place behind Aura Minerals. The tech sector was the top performer on the TSX in 2020 and Shopify was the market driver.
The flywheel in full screen
Shopify is more than an e-commerce platform in 2021. It has evolved into a critical internet infrastructure for e-commerce. Entrepreneurs around the world are using Shopify to grow their businesses and reach their full potential. According to its chairman Harley Finkelstein, the cumulative gross market value (GMV) now stands at US $ 400 billion.
In the third quarter of 2021 (quarter ended September 30, 2021), revenue growth compared to the third quarter of 2020 was 46%. Amy Shapero, Chief Financial Officer of Shopify, said the strength of the company’s flywheel is evident in a normalized spending environment. Shapero added, “Our results show that Shopify is performing well, giving our merchants the tools they need to differentiate themselves in a growing number of markets.”
Other financial highlights during the quarter were 37% and 51% year-over-year growth, respectively, in subscription and merchant solutions revenues. Shopify Monthly Recurring Revenue (MRR) reached US $ 98.8 million (+33%), up from US $ 74.4 million as of September 30, 2020.
The company launched several firsts during the quarter, starting with Shopify Markets. Entrepreneurs have an avenue for cross-border trade. Through the product, traders can easily enter new markets to increase buyer confidence and conversion. In short, traders have a unified view of all of their business across borders.
Shopify Balance is a no-cost money management product for US merchants. It offers quick access to cash, a card to spend online, on mobile or in stores. There are rewards such as cash back, perks, and daily spending discounts.
Merchants with a TikTok for Business account can add or sell their products in TikTok Shopping. A physical Shopify store opened in New York and Shopify Shipping launched in the UK for UK merchants.
Outlook for the fourth quarter of 2021
For Q4 2021, Shopify sees a more normalized pace compared to 2020. More merchants will join the platform, albeit at a slower pace than last year. In addition, he does not expect GMV to increase as in 2020. However, management still expects the fourth quarter to contribute the largest share of 2021 revenue.
Investors can assess from the valuation whether tech stock is a must buy for the holiday season. But based on forecasts from market analysts, the potential 12-month return is a tiny 1.5%. As of November 3, 2021, Shopify is trading at $ 1,851.40 per share. The gain since the start of the year is 29%, which is not as scorching as you might expect.