E-commerce companies are taking a hit on their financials as a portion of consumer spending is rolling back to physical retail amid the easing of COVID-led restrictions. This is reflected through Shopify’s (SHOP) recent Q3 performance and continued decline in its website traffic.
Per TipRanks’ new Website Traffic tool, total visits on shopify.com have declined about 10% since Q1. Shopify tallied 194.8 million total visitors in Q3. That number compares unfavorably with 216.6 million and 199.4 million visitors recorded in Q1 and Q2, respectively.
The e-commerce company delivered lower-than-expected Q3 financial numbers. Its top and bottom line fell short of Street’s estimates as growth moderated.
To be fair, the company was up against tough year-over-year comparisons as the prior-year quarter benefitted from an extreme level of e-commerce shopping.
Addressing the concerns around the moderation in Shopify’s growth rate, its CFO, Amy Shapero, said that the “return to some normalcy” and “more in-person retail and experiences” drove e-commerce’s share of overall retail lower compared to the prior year.
However, she remains confident that e-commerce’s share of overall retail will increase in the long term.
Though Shopify disappointed with its quarterly performance, surprisingly, its stock gained 7% on Thursday.
Taking a note of this, William Blair analyst Matthew Pfau pointed out “management’s positive commentary around traction with newer initiatives, such as POS (point-of-sale) and social commerce” for the stock’s growth.
It’s worth noting that the number of retail locations using Shopify’s POS Pro system increased during Q3. Moreover, the share of GMV (Gross Merchandise Volume) through its point-of-sale once again expanded during the quarter, reflecting benefits from the launch of its integrated POS hardware in Germany and New Zealand.
Also, Shopify launched its new POS Pro software for Android devices, which is encouraging. While the company’s social commerce is in its early stages, Shopify acknowledged that it is growing fast.
With Shopify’s newer initiatives, Pfau expects to grow revenues by about 30% in the coming years. However, he maintains a Hold rating on Shopify stock as his revenue growth expectation “is appropriately reflected” in its price.
On TipRanks, Shopify stock has a rating consensus of Moderate Buy, based on eight Buys and five Holds. Additionally, SHOP scores a 9 out of 10 from TipRanks’ Smart Score rating system, indicating that it will likely outperform the market.
The average Shopify price target of $1711.66 implies 17.5% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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