Shopify Posts Better-Than-Expected Q2 Results; Shares Dip 3%

Shares of Shopify (SHOP) were down 3% in early trading on Wednesday despite the e-commerce platform reporting Q2 results that beat analysts’ estimates. Revenue hit $1 billion for the first time due to record gross merchandise volume (GMV).

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Revenue came in at $1.12 billion for the quarter ended June 30, an increase of 57% from $714.3 million in the prior-year quarter.

Meanwhile, net income was $879.1 million ($6.90 per share), an improvement from $36 million ($0.29 per share) in Q2 2020. On an adjusted basis, Shopify earned $2.24 per share, up from $1.05 in the prior-year period.

Both revenue and earnings beat expectations. According to Zacks Consensus Estimate, Shopify was expected to post adjusted EPS of $0.98 on revenue of $1.04 billion.

Shopify generated $334.2 million in Subscription Solutions revenue, up 70% year-over-year, with the growth primarily driven by more merchants joining the platform. In addition, Merchant Solutions revenue amounted to $785.2 million, up 52%, mostly driven by the growth of GMV. GMV was $42.2 billion in the second quarter, up 40% from the previous year.

Shopify’s CFO Amy Shapiro said, “Shopify fired on all cylinders in our second quarter, keeping our merchants well equipped to seize the opportunities presented in a post-pandemic retail era. As consumer spending remained strong, our merchants thrived and extracted more value from our platform, contributing to our rapid growth. We built on our momentum, making significant updates to our platform infrastructure, expanding strategic partnerships, and advancing our portfolio of growth initiatives to future-proof the success of tomorrow’s entrepreneurs.”

Shopify continues to expect fast revenue growth in 2021, but at a slower pace than in 2020. (See Shopify stock charts on TipRanks)

Two days ago, CIBC analyst Todd Coupland maintained a Hold rating on SHOP while raising his price target to $1,700 (C$2,140). This implies 9% upside potential.

Overall, consensus on the Street is that SHOP is a Moderate Buy based on 9 Buys and 7 Holds. The average Shopify price target of C$2,101.64 implies upside potential of about 7% to current levels.