Many consider Shopify (Nasdaq: SHOP) to be the next Amazon (Nasdaq: AMZN), and it's certainly fulfilling this prophecy from a stock market perspective. The company became public in May 2015 at $17. Following its earnings report, the stock reached $739 which is a gain of more than 4,200%.
It lets companies quickly create online stores to sell their products and services. The company's growth is impressive as revenue has increased from $123 million on a trailing 12-month basis before its IPO to $1.73 billion currently. However, its stock is expensive by traditional valuation metrics given its $80 billion market cap. Further, the company has lost money nearly every quarter, as it continues to invest in growth.
So far, Wall Street has enthusiastically rewarded this strategy. The company's revenue growth, juicy margins, and dominance within a growing market allow it to focus on growth rather than near-term results.
Coronavirus Impact
Shopify has been one of the big winners as more commerce moves online. And, the coronavirus has accelerated this trend as a number of small businesses set up online storefronts. New stores increased by 62% between March 13 and April 24 when the shutdown took hold.
Shopify took advantage of conditions by offering a free 90-day plan for all standard plans, extending gift card availability to all its customers, curbside pickup, and multiple resources to help stores take advantage of government programs and educational resources to help stores maximize their online presence.
Inside the Numbers
Shopify's merchants saw a 72% decline for in-store sales, however, they were able to replace 94% of this lost revenue with online sales which is a huge win for their small business customers and a validation of Shopify's business model. In turn, first-quarter revenue came in at $470 million which beat expectations of $30 million and was a 47% increase over the first quarter in 2019. This resulted in a surprise profit of $22 million, while most analysts were projecting a $20 million loss.
The total amount of sales on Shopify's platform was $17.4 billion a 46% increase from the previous year. Total payments on the platform hit $7.4 billion. Another source of revenue was Shopify Capital which provides loan and financial services to its merchants. This segment's monthly revenue reached $544 million.
Conclusion
Shopify was already on an ascent. The coronavirus has resulted in more merchants flocking to its platform and steepens its trajectory.