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4 Metrics Behind Shopify's Soaring Stock Price

By Daniel Sparks - Jun 22, 2021 at 7:45AM

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The e-commerce specialist's business is seeing incredible momentum.

Shares of e-commerce platform specialist Shopify (SHOP -2.26%) have been a tear recently. The stock is up 35% over the past three months and 25% during the past 30 days alone. Not only has the growth stock rebounded from a sell-off earlier this year but it's now hitting new all-time highs.

The stock's momentum has been helped by strong business execution from Shopify, including impressive first-quarter results and important strategic partnerships with tech giants Alphabet (GOOGL 0.33%) (GOOG 0.19%) and Facebook (META 0.22%).

Here's a look at some of the key metrics likely driving the stock's recent bullish run.

Shopify e-commerce platform on a smartphone, laptop, and tablet.

Image source: Shopify.

1. 110% revenue growth

Shopify's first-quarter revenue more than doubled, rising to $988.5 million. 

"Shopify's momentum continued into 2021 as digital commerce tailwinds remained strong and merchants took advantage of the range of capabilities offered by our platform," said Shopify CFO Amy Shapero in the company's first-quarter earnings release.

2. Gross profit of $559 million

Shopify's first quarter of 2021 was a breakout period for the tech company's profitability. Highlighting Shopify's scalable business model, gross profit dollars increased faster than revenue, rising 117% year over year and accounting for nearly 57% of total revenue.

Strong growth in Shopify's gross profit bodes well for the company's future growth prospects, as it's management's plan to reinvest these dollars back into its business in 2021 "as aggressively as we can, with the year-over-year growth in operating expenses accelerating each quarter throughout the rest of the year," management explained in Shopify's first-quarter earnings release.

Given management's impressive track record of capitalizing on growth opportunities, this is great news for investors.

3. Shopify Payments processed surged 135%

Gross merchandise volume (GMV) processed on Shopify Payments during Q1 increased from $7.3 billion in the year-ago quarter to $17.3 billion. Further, the company's native Shopify Payments solution represented 46% of total GMV, up from 42% of GMV in the year-ago quarter.

4. Market opportunity: Over 1 daily billion shopping sessions

One more recent narrative likely exciting Shopify investors is the company's announcement last week that Shopify's one-click checkout experience, Shop Pay, is coming to Alphabet's Google, Facebook's Instagram, and Facebook itself.

Between the three platforms, there are easily over a billion shopping sessions that take place every day. As Shopify noted in a press release about the strategic partnership, there's a billion shopping sessions every day on Google alone, and more than 1.8 billion daily active users on Facebook (this data doesn't even include Facebook's Instagram). These partnerships represent a massive market opportunity, to say the least.

Shopify's incredible momentum and its powerful partnerships with tech giants highlight why investors are getting so excited about the stock recently.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Daniel Sparks owns shares of Shopify. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Shopify Inc. Stock Quote
Shopify Inc.
SHOP
$39.84 (-2.26%) $0.92
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$122.08 (0.33%) $0.40
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
META
$180.89 (0.22%) $0.39
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$122.88 (0.19%) $0.23

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

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