Wall Street was in an uncertain mood on Wednesday morning as investors continued their debate about whether the stock market can continue to recover despite massive economic disruptions from the coronavirus pandemic. Optimists have been hopeful throughout the recent rally that the fallout from lockdowns and other measures to fight COVID-19 won't be as severe or long-lasting as feared -- but it'll take time for the results to bear out.
As of noon EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 57 points to 23,826 and the S&P 500 (SNPINDEX:^GSPC) lost two points to 2,867. However, the Nasdaq Composite (NASDAQINDEX:^IXIC) bucked the downtrend and gained 81 points to 8,890.
One of the secrets to success for small businesses hit hard by coronavirus lockdowns has been to take to the internet. Embracing e-commerce can be a winning strategy, and the companies that are helping people get their businesses online are seeing strong results. In particular, Shopify (NYSE:SHOP) and MercadoLibre (NASDAQ:MELI) saw their shares jump after reporting encouraging earnings.
Shopify pops on profit
Shares of Shopify jumped 5%, hitting another record high. The e-commerce platform provider reported first-quarter results that included a surprise profit on its bottom line.
Shopify has been a fast grower for awhile, but its first-quarter numbers were quite good. Revenue jumped 47% from the previous-year's period, with growth in gross merchandise volume of goods sold on the platform helping to boost its merchant-solutions segment's top line by 57% year over year. Even though Shopify took thousands of stores off its platform due to terms-of-service violations, it was able to triple its net income from year-ago levels.
CEO Tobi Lutke explained how Shopify is supporting entrepreneurs of all sizes. Initiatives like 90-day free trials, extra features like gift cards for merchants, and curbside pickup and delivery services helped Shopify create 62% more new stores between mid-March and late April than it did in the six weeks prior to that period. Gross merchandise volume growth accelerated in April as a result, as many businesses successfully replaced point-of-sale transactions with online sales.
Shopify has ample liquidity, and it's using its Shopify Capital service to help business clients get through these tough times. Although the company is still looking closely at trends in consumer spending and the labor market for signs of possible weakness ahead, Shopify has thus far performed admirably.
MercadoLibre shoots higher
Elsewhere, shares of MercadoLibre soared 20%. The Latin American e-commerce specialist reported encouraging first-quarter results that restored some confidence about the potential impact of the coronavirus pandemic in other regions around the world.
MercadoLibre's growth showed few signs of slowing. Net revenue jumped more than 70% from year-ago levels on a currency-neutral basis, and total payment volume jumped 82% year over year. Gains in gross merchandise volume showed that consumers continue to shop on the MercadoLibre marketplace, and total or partial lockdowns throughout much of Latin America didn't have as much of an adverse impact as some had feared. The company saw a rise of more than 30% in active users.
MercadoLibre did see a shift in the types of purchases shoppers made, with fewer purchases of discretionary goods and more emphasis on essential items. However, slowdowns early in the lockdown period were followed by weekly improvements subsequently, and MercadoLibre hasn't seen a marked deterioration in the non-performing loans it extended to business clients. Mobile wallet, asset management, and online payments services did extremely well.
Investors are optimistic that April's strength shows MercadoLibre's ability to weather the coronavirus storm. At least for now, the Latin American e-commerce giant isn't changing its strategy, and that's a major vote of confidence that shareholders like seeing right now.