Shopify Soars 10% On Earnings Beat

Shopify (SHOP) shares are up over 10% in U.S. morning trading after the company crushed 2Q estimates, fueled by a surge in online demand.

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The e-commerce giant’s earnings of $1.05 per share topped analysts’ expectations of $0.01. Moreover, 2Q revenues surged 97% to $714.3 million year-over-year and beat analysts’ estimates of $513.8 million. The rising coronavirus cases have accelerated e-commerce activities in North America, which benefited Shopify’s revenues.

Shopify’s subscription solutions sales jumped 28% year-over-year, as more merchants joined the platform. Merchant solutions also showed revenue growth of 148% from the year-ago quarter, led by the growth of GMV (gross merchandise volume). New stores created on the Shopify’s e-commerce platform grew by 71% in the quarter.

Goldman Sachs analyst Christopher Merwin upgraded Shopify to Buy from Hold, a day before its earnings, and reiterated a $1,127 (2.7% upside potential) price target on the stock. Merwin expects the growing demand for online services to serve as a long-term catalyst. He added that e-commerce activities “would provide a sustained tailwind to SHOP’s GMV growth and by extension its merchant solutions revenue.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 9 Buys, 14 Holds, and 1 Sell. The average price target of $931.97 implies downside potential of about 15%. (See SHOP stock analysis on TipRanks).