The tech darling, if not the front act, of the Toronto Stock Exchange (TSX) never ceases to amaze investors. Shopify’s (TSX:SHOP)(NYSE:SHOP) blowout earnings in Q1 2021 showed a triple-digit revenue growth (110%). Many thought the leading global commerce company would fail to clear the high bar, but it did.
Following the latest quarterly results on April 28, 2021, the share price jumped 11.1% to $1,589.47. Shopify remains the largest publicly-listed company on the TSX with its $180.41 billion market capitalization as of month-end April. The second-running Royal Bank of Canada is $13.3 billion short.
It appears, without a doubt, that the business outlook for Shopify is brighter than ever. Harley Finkelstein, Shopify’s President, said, “More entrepreneurs around the world are choosing Shopify to launch and grow their businesses, and for good reason.”
Finkelstein emphasized that Shopify’s singular focus is to make entrepreneurship easier and make it easier for entrepreneurs to succeed. Shopify CEO Amy Shapero adds, “Shopify’s momentum continued into 2021 as digital commerce tailwinds remained strong and merchants took advantage of the range of capabilities offered by our platform.”
The stellar Q1 2021 results only reinforce the fact that Shopify’s merchant-first business model positions the company to capture the massive opportunity from digital commerce growth. It benefits both the merchants and Shopify. According to Shapero, by focusing on building a commerce operating system, Shopify will help shape the future of retail.
The total revenue of $988.6 million in Q1 2021, a 110% growth acceleration, is nothing short of spectacular. Shopify’s subscription solutions revenue grew 71% year-over-year to $320.7 million as more merchants joined the platform. Likewise, the growth of gross merchandise volume (GMV) resulted in a 137% increase in merchant solutions revenue to $668.0 million.
GMV in Q1 2021 was $37.3 billion, or an increase of $19.9 billion increase over the same period in 2020. Notably, Shopify reported a 117% gross profit dollar growth to $558.7 million compared with $257.0 million in Q1 2020.
Shopify’s operating income of $118.9 million during the first quarter (12% of revenue) beat the $73.2 million loss (16% of revenue) in the comparable period from a year ago. More importantly, the company posted a $1,258.4 million $1.25 billion net income versus the $31.4 million net loss in Q1 2020.
Cash-wise, Shopify had $7.87 billion in its war chest as of March 31, 2021. The $1.5 billion increase was due to the net proceeds from Shopify’s offering of Class A subordinate voting shares in Q1 2021. Even merchants in the U.S., Canada, and the U.K. received a total of $308.6 million in merchant cash advances and loans from Shopify Capital in the first quarter.
Expanding partner ecosystem
Shopify’s partner ecosystem expansion continues, given that about 45,800 partners referred a merchant to Shopify over the past 12 months or a 73% increase from a year ago. The e-commerce platform has gone a long way from obscurity to phenomenon.
TSX’s top stock is firing on all cylinders. However, the share price is a bit expensive today. You could perhaps wait for a correction or retreat to pick up some shares. The growth runway is long, but the pace could be slowing down the road. Risks are ever-present even in a pure growth play like Shopify.