Why Is Shopify Stock Up 10x Since Its IPO?

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Shopify (NYSE:SHOP) – an e-commerce platform that allows businesses to create and run online stores – has seen its stock soar by close to 10x since its 2015 IPO. The company has two revenue streams – namely Subscriptions (which gives users access to its e-commerce platform and tools) and Merchant Services (which include payments, shipping, etc). In this analysis, we take a look at some of the trends that drove the expansion in the company’s stock price.

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Shopify Is Up 10x Since Its 2015 IPO, Outperforming Amazon Which Is Up ~5x In the Same Period

  • Stock up from ~$28 in May 2015 to ~$300 currently, implying CAGR of 82%.
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Revenues Up By Over 5x Over Last 4 Years

  • Shopify’s revenues have increased from around $0.2 billion in FY’15 to about $1.1 billion in FY’18

Growing Merchant Base And Spend Per Merchant

  • The number of merchants using Shopify has grown from 243k in 2015 to 820k in 2018.
  • The average revenue per merchant has increased from $70 per month to about $110 per month.

Growth In GMVs Transacted On Shopify Platform Outpacing Other E-Commerce Giants

  • Gross merchandise value – the value of merchandise sold by Shopify’s customers – grew from under $8 billion in 2015 to $41 billion in 2018.
  • This translates into a 3Y- CAGR of 75% and compares to a CAGR of 28% for Amazon (ex. AWS) and 5% for eBay.

Increasing Mix Of High-Value Customers

  • While Shopify primarily caters to small and medium businesses with its “Basic” and “Shopify” plans which cost $29 and $79, respectively, per month, the company is increasingly targeting larger enterprises with its “Plus” plans.
  • The company had over 5300 users on Plus plans as of June 2019, compared to over 2500 users in 2017.

Increasing Uptake For Merchant Solutions, Such As Payments

  • Shopify provides additional services to merchants – ranging from payments to shipping.
  • This revenue has grown at a CAGR of 60% in 4 years, versus about 40% for subscriptions.
  • For instance, gross payments processed by Shopify is up almost 3x since 2016.
  • Shopify is also investing ~$1 billion in building its own fulfillment network.

Shopify’s Total Addressable Market Is Sizable

  • Global e-commerce sales are projected to grow to about $3.5 trillion in 2019.
  • As Shopify’s GMV stands at less than 1.5% of this number, it could allow the company significant room for growth.

 

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