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Shopify (TSE:SHOP)
TSX:SHOP
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Shopify
(TSX:SHOP)77Outperform
Positive Factors
Financial Performance
Shopify reported another solid beat that saw accelerating volume and revenue growth and FCF margin upside.
Product and Platform Capabilities
Shopify is having success opening up new growth vectors like POS and B2B, signaling healthy growth rates.
Negative Factors
Subscription Revenue
MRR of $178M was modestly below the $182M consensus due to the transition from 1-month paid trials to 3-month trials, which is expected to be a headwind to subscription revenue in H1 2025.
Shopify (SHOP) vs. S&P 500 (SPY)
Market Cap
$209.82B
Dividend YieldN/A
Average Volume (3M)1.99M
Price to Earnings (P/E)71.6
Beta (1Y)1.92
Revenue Growth27.85%
EPS Growth1400.97%
CountryCA
Employees8,300
SectorTechnology
Sector Strength48
IndustrySoftware
Share Statistics
EPS (TTM)2.16
Shares Outstanding1,215,528,100
10 Day Avg. Volume2,145,863
30 Day Avg. Volume1,992,021
Financial Highlights & Ratios
PEG Ratio0.05
Price to Book (P/B)N/A
Price to Sales (P/S)14.77
Price to Cash Flow (P/CF)59.60
P/FCF Ratio59.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$190.45Price Target Upside23.23% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering34
Shopify Business Overview & Revenue Model
Company DescriptionFounded in 2004, Canada-based Shopify, Inc. operates a cloud-based commerce platform designed for small and medium-sized businesses. Its software is used by merchants to run business across all sales channels, including web, tablet and mobile storefronts, social media storefronts, and brick-and-mortar and pop-up shops.
How the Company Makes MoneyShopify makes money primarily through two main revenue streams: subscription solutions and merchant solutions. Subscription solutions generate revenue from monthly subscription fees charged to merchants for access to Shopify's online platform, which offers various tiers of service with different features. Merchant solutions generate revenue from additional services provided to merchants, such as payment processing through Shopify Payments, point-of-sale systems, and other value-added services like Shopify Shipping and Shopify Capital. These solutions benefit from Shopify's partnerships with financial institutions, logistics providers, and technology partners, which help to enhance the service offerings and drive further monetization opportunities.
Shopify Financial Statement Overview
Summary
Shopify shows strong financial performance with robust revenue growth of 25.78%, a high gross profit margin of 50.31%, and improved net profit margin at 22.73%. The balance sheet is solid with a low debt-to-equity ratio of 0.10 and a high return on equity of 17.47%. Despite strong cash flows, vigilance is needed over capital expenditures.Income Statement
Shopify's income statement shows strong performance with a notable revenue growth rate of 25.78% from 2023 to TTM. The gross profit margin is robust at 50.31%, indicating efficient cost management. The net profit margin has significantly improved to 22.73% in TTM, showcasing enhanced profitability. EBIT and EBITDA margins are healthy at 12.11% and 13.56%, respectively, reflecting solid operational efficiency. The growth trajectory and profitability metrics signal a strong competitive position in the software industry.85
Very Positive
Balance Sheet
The balance sheet reflects a solid financial position with a low debt-to-equity ratio of 0.10, indicating conservative leverage. Return on equity is impressive at 17.47%, showing effective use of equity to generate profits. The equity ratio stands at 83.00%, highlighting a strong capital structure. Overall, Shopify's balance sheet stability is supported by ample cash reserves and minimal debt, although the high stockholders' equity may limit flexibility in capital allocation.80
Positive
Cash Flow
Shopify's cash flow statement highlights strong cash generation capabilities, with a substantial free cash flow growth rate of 76.48% from 2023 to TTM. The operating cash flow to net income ratio is 0.80, and the free cash flow to net income ratio is 0.79, indicating efficient cash conversion. Despite robust cash flows, the company should maintain vigilance over capital expenditures and investment activities to sustain this momentum.78
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 8.88B | 7.06B | 5.60B | 4.61B | 2.93B | Gross Profit |
| 4.47B | 3.52B | 2.75B | 2.48B | 1.54B | EBIT |
| 1.07B | 260.00M | -822.30M | 268.64M | 90.15M | EBITDA |
| 1.07B | -8.00M | -729.00M | 334.95M | 160.21M | Net Income Common Stockholders |
| 2.02B | 132.00M | -3.46B | 2.91B | 319.51M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 5.48B | 5.01B | 5.05B | 7.77B | 6.39B | Total Assets |
| 13.92B | 11.30B | 10.76B | 13.34B | 7.76B | Total Debt |
| 1.13B | 1.15B | 1.40B | 1.17B | 912.89M | Net Debt |
| -372.00M | -263.00M | -252.72M | -1.33B | -1.79B | Total Liabilities |
| 2.37B | 2.23B | 2.52B | 2.21B | 1.36B | Stockholders Equity |
| 11.56B | 9.07B | 8.24B | 11.13B | 6.40B |
| Cash Flow | Free Cash Flow | |||
| 1.60B | 905.00M | -186.47M | 453.64M | 382.96M | Operating Cash Flow |
| 1.62B | 944.00M | -136.45M | 504.43M | 424.96M | Investing Cash Flow |
| -1.59B | -1.24B | -718.57M | -2.35B | -1.93B | Financing Cash Flow |
| 61.00M | 60.00M | 17.55M | 1.65B | 3.56B |
Shopify Technical Analysis
Neutral
154.55
Price Trends
161.48
Negative
148.98
Positive
120.52
Positive
Market Momentum
-0.73
Positive
39.38
Neutral
20.11
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:SHOP, the sentiment is Neutral. The current price of 154.55 is below the 20-day moving average (MA) of 169.98, below the 50-day MA of 161.48, and above the 200-day MA of 120.52, indicating a neutral trend. The MACD of -0.73 indicates Positive momentum. The RSI at 39.38 is Neutral, neither overbought nor oversold. The STOCH value of 20.11 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:SHOP.
Shopify Risk Analysis
Shopify disclosed 50 risk factors in its most recent earnings report. Shopify reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Shopify Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $209.82B | 71.60 | 17.47% | ― | 27.85% | 1400.97% | |
72 Outperform | C$4.43B | 157.81 | 0.01% | ― | 14.85% | -105.25% | |
61 Neutral | C$2.79B | ― | -5.34% | ― | 23.95% | 39.68% | |
59 Neutral | $22.39B | 11.53 | -18.05% | 2.31% | 5.00% | -25.89% | |
52 Neutral | C$435.91M | 52.04 | 5.27% | ― | 12.27% | ― |
* Technology Sector Average
Performance Comparison
TSE:SHOP
Shopify
147.24
47.37
47.43%
BB
BlackBerry
4.42
1.80
68.70%
DOOO
BRP
37.56
-25.97
-40.88%
TSE:KXS
Kinaxis Inc
156.10
12.25
8.52%
TSE:REAL
Real Matters Inc
5.89
-0.04
-0.67%
TSE:LSPD
Lightspeed POS Inc
16.70
-1.95
-10.46%
Shopify Earnings Call Summary
Earnings Call Date: Feb 11, 2025 | % Change Since: -9.91% | Next Earnings Date: May 7, 2025
Earnings Call Sentiment Positive
Shopify had a strong year with significant revenue and GMV growth, expanding market share in key regions, and onboarding major new clients and partnerships. However, the company faced challenges with increased operating expenses, gross margin declines, and strategic shifts impacting MRR growth. Despite these challenges, the positive achievements and growth metrics suggest a robust performance.Highlights
Record Revenue and GMV Growth
Shopify achieved nearly $300 billion in GMV and $9 billion in revenue for 2024, marking a 26% revenue growth and a 24% GMV growth compared to last year.
Strong Q4 Performance
Q4 delivered 31% revenue growth and 22% free cash flow margins, marking the highest quarterly GMV rate since Q4 2021.
Significant Expansion in Market Share
Shopify holds over 12% of the U.S. e-commerce market share and continues to grow rapidly in Europe and Japan.
New Enterprise Clients and Partnerships
Major brands like Reebok, Champion, and Warner Music Group launched on Shopify, with notable partnerships including Roblox and YouTube Shopping.
Shop Pay and Shop App Growth
Shop Pay processed $27 billion in GMV, up 50% year-over-year, and Shop App GMV grew 84%.
International Growth
International regions outperformed North America with a 33% growth rate, particularly strong in Europe.
Lowlights
Increased Operating Expenses
Operating expenses increased to 32% of revenues for Q4 due to higher transaction volumes in payments and capital businesses.
Gross Margin Decline
Subscription Solutions gross margin decreased to 79.9% from 81.5% due to higher hosting costs, and Merchant Solutions gross margin decreased to 38.2% from 39.2%.
Headcount Reduction
Headcount was reduced to just under 8,100 employees, down from approximately 8,300 at the end of 2023.
Impact of Pricing and Trial Changes
The shift to 3-month trials impacted MRR growth, particularly in Standard and offline categories.
Company Guidance
During Shopify's Fourth Quarter 2024 Conference Call, the company reported significant achievements and provided guidance for 2025. Shopify closed 2024 with nearly $300 billion in Gross Merchandise Volume (GMV) and $9 billion in revenue, marking a 26% revenue growth and an 18% free cash flow margin for the year. The fourth quarter alone delivered 31% revenue growth and 22% free cash flow margins, achieving what they described as the "rule of 50." Shopify's international markets outperformed North America, contributing to a 33% growth rate. The company also highlighted milestones such as surpassing $1 billion in operating income and reaching over 12% market share in U.S. e-commerce. Looking ahead to 2025, Shopify aims to continue its strong operational performance and product innovation, with a focus on expanding its enterprise offerings, offline capabilities, and international presence, particularly in Europe and Japan. The company also plans to deepen investments in AI to enhance merchant success and streamline operations, while maintaining a robust free cash flow margin profile.Shopify Corporate Events
Delistings and Listing Changes
Shopify’s Class A Shares Now Trading on NYSE
Positive
Feb 11, 2025
Shopify has reported a significant update concerning its operations, with its Class A Subordinate Voting Shares being traded on the New York Stock Exchange under the ticker symbol ‘SHOP’. This development is expected to enhance Shopify’s visibility in the financial markets and potentially attract more investors, solidifying its position as a key player in the e-commerce sector.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.