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Why Shopify Stock Jumped 25.3% in June

By Keith Noonan - Jul 2, 2020 at 7:54AM

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The e-commerce stock has posted a stellar performance in 2020 and is up roughly 156% year to date.

What happened

Shares of Shopify (SHOP -1.18%) gained 25.3% in June, according to data from S&P Global Market Intelligence. The e-commerce services stock posted another month of big gains thanks to a major new partnership and positive coverage from analysts. 

^SPX Chart

^SPX data by YCharts

Walmart announced on June 15 that it would feature select Shopify stores on its third-party online retail marketplace -- a development that could have big implications for the competitive landscape in the e-commerce space. Shopify's valuation saw significant gains following the news, and shares continued to climb as analysts raised their price targets on the stock. 

A miniature shopping cart next to a laptop.

Image source: Getty Images.

So what

Walmart is investing to build its online retail business, and bringing products from Shopify stores on to its e-commerce platform could help both companies challenge Amazon.com's dominance in the space. Walmart will feature products from select Shopify-powered businesses directly on its website. The retail giant expects that it will be selling goods from roughly 1,200 Shopify partners by the end of this year. 

Getting featured on Walmart.com has the potential to be a big sales driver for businesses using Shopify, and the partnership has added to the value of the e-commerce services company's thriving platform. Analysts were generally very bullish on the development. 

RBC Capital analyst Mark Mahaney published a note on June 18 reaffirming his "outperform" rating on Shopify and raising his one-year price target on the stock from $825 to $1,000 per share. Mahaney's target suggested roughly 20% upside on the stock at the time of the note's publication, and the company's share price quickly went on to reach the analyst's valuation estimate.

Now what

Shopify has continued to climb early in this month's trading, gaining 6.8% on July 1 and closing the day at $1,016.64 per share.

SHOP Chart

SHOP data by YCharts

The e-commerce company stands as one of this year's best-performing large-cap stocks and is now valued at roughly 56 times this year's expected sales. That's a highly growth-dependent valuation, but the company still has plenty of room for expansion over the long term and looks poised to enjoy continued tailwinds from the increasing importance of online retail. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Shopify and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Shopify Inc. Stock Quote
Shopify Inc.
SHOP
$36.86 (-1.18%) $0.44
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$142.30 (0.14%) $0.20
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$139.07 (-0.32%) $0.45

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

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