Shopify Inks Social Commerce Partnership With TikTok

Canada’s Shopify has inked a partnership with TikTok to help its more than 1 million merchants market and sell its products on the Chinese video-sharing app. Shares closed 4.4% higher on Tuesday.

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Under the terms of the commerce partnership, merchants will be able to create and connect their TikTok for business purposes and deploy in-feed shoppable video ads directly within the Shopify (SHOP) e-commerce platform. Merchants select which product they would like to feature, and video ads are automatically generated for TikTok users to click on, and products can be bought via their Shopify stores. Financial terms of the collaboration weren’t disclosed.

Shopify provides to mainly small and medium-sized businesses and merchants, an online platform to advertise and sell their goods. The e-commerce software company helps them scale their businesses and offers other support services like payment processing, shipping and logistics services.

Shopify and TikTok said they also plan to collaborate on testing new commerce features over the coming months to expand the merchants’ paid and organic video reach and boost their customer base.

“We’re thrilled to be the first partner to welcome TikTok to the world of commerce, particularly right now, as our merchants prepare for a busy online holiday shopping season,” said Satish Kanwar, Shopify’s Product Vice President. “TikTok is one of the world’s fastest growing entertainment platforms with over 100 million highly engaged users in the US alone. The TikTok channel means Shopify merchants – even those without a strong TikTok following of their own yet – can connect with these new audiences using content that feels authentic and genuine to the TikTok experience.”

The TikTok channel is now available for Shopify merchants in the US. It will roll out in other select markets throughout North America, Europe and Southeast Asia in early 2021.

Shares in SHOP have exploded 171% year-to-date, and the stock scores a cautiously optimistic Moderate Buy consensus from the Street. The average analyst price target of $1,125.88 indicates a more modest 4% upside potential lies ahead.

RBC Capital analyst Mark Mahaney this week reiterated a Buy rating on the stock with a $1,250 price target, as intra-quarter data lets him believe that Street estimates for the company’s September quarter, to be released on Oct. 29, are slightly low.

Mahaney expects 1.29MM in Total Merchants (EOP) in Q3 (vs. Street at 1.28MM) up from 1.07MM at the end of 2019. In addition, the analyst believes that the company may announce a 1.5MM merchant milestone update.

According to his estimates, Monthly Recurring Revenue (MRR) in 3Q will be up 24% Y/Y at $63MM, helped by SHOP’s 90-day free trial offer that started in March and ended on 06/01 and which should also provide a boost to subscription revenue growth. (See SHOP stock analysis on TipRanks)