Please ensure Javascript is enabled for purposes of website accessibility

Why Shopify Stock Jumped 19.9% in May

By Keith Noonan – Jun 2, 2020 at 11:43AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The e-commerce stock is crushing the market in 2020 and has roughly doubled year to date.

What happened

Shares of Shopify (SHOP 4.90%) climbed 19.9% in May, according to data from S&P Global Market Intelligence. The e-commerce stock has posted fantastic performance this year, and it continued to climb last month thanks to strong first-quarter results, new product announcements, and momentum for the broader market.^SPX Chart

^SPX data by YCharts.

Shopify published first-quarter results on May 6, delivering sales and earnings that came in well above the market's expectations. The company posted non-GAAP (adjusted) earnings per share of $0.19 on sales of $470 million, trouncing the average analyst estimate's call for a per-share loss of $0.18 on revenue of $443.11 million. 

So what

Shopify's subscription solutions revenue rose 34% year over year to reach $187.6 million last quarter, and its merchant solutions revenue climbed 57% year over year to reach $282.4 million. Overall revenue for the quarter came in 46.6% higher compared to the prior-year period. The company announced that new accounts created on its platform increased 62% between March 13, 2020, and April 24, 2020, compared to the prior six weeks, and investor enthusiasm for online retail amid growth trends accelerated by the novel coronavirus continued to benefit the stock last month.

Shares also got a boost following new products announced at the company's Shopify Reunite virtual event on May 20. The e-commerce services provider announced Shopify Balance (a suite of software products for merchants to monitor finances and orchestrate transactions, enable advantage of faster in-store spending, and take advantage of a new rewards program) and Shopify Installments -- a new service allowing for installment payments on the platform. The company also announced updates for its Shopify Capital financing service and new gift card, tipping, and international sales features. 

Now what

Shopify's big gains in May pushed its valuation past that of Royal Bank of Canada, giving it the status of Canada's most valuable company. Some analysts have voiced concerns that Shopify's valuation has grown too quickly, but its central role in enabling small and medium-sized businesses to thrive in online retail and increasing adoption among large enterprises suggest that its long-term outlook is still very promising. 

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Shopify. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Shopify Inc. Stock Quote
Shopify Inc.
SHOP
$29.21 (4.90%) $1.36
Royal Bank of Canada Stock Quote
Royal Bank of Canada
RY
$91.73 (2.41%) $2.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.