Shopify Inc
Shopify Inc. (NYSE: SHOP) is a provider of Internet infrastructure for commerce, offering tools to start, grow, market, and manage a retail business. The Company's software enables merchants to run their business across all their sales channels, including Web and mobile storefronts, physical retail locations, social media storefronts, and marketplaces.
Recent Financial and Business Updates:
Recent Business Highlights:
- On July 26, Shopify unveiled its semi-annual product and innovation showcase, known as Shopify Editions. The Summer '23 Edition featured more than 100 updates, including the following:
- Shopify Magic: This comprises a suite of AI-powered features integrated across the Shopify platform, designed to simplify merchant operations.
- Sidekick: Under the Shopify Magic umbrella, Sidekick serves as an AI-enabled commerce assistant, empowering merchants to enhance productivity, streamline workflows, make informed decisions, and reduce the time spent on operational tasks.
- Shopify Collective: This is a cost-effective, low-risk business-to-business solution enabling merchants to source products from other brands on the Shopify platform, with direct shipment to their customers.
- Shopify Marketplace Connect App: An integrated hub for merchants to sell on major marketplaces such as Amazon, eBay, and Walmart, while efficiently managing and fulfilling orders through Shopify.
- Shopify Checkout: Expanding its extensibility with over 15 new APIs and updates, offering partners and developers the ability to create unique checkout experiences through apps, managed within the checkout editor, and scaling alongside merchants' evolving checkout needs.
- Shopify Credit: Introducing a full-payment business credit card exclusively for Shopify merchants, featuring enhanced cashback rewards on their primary spending categories.
- Integrated Shop Pay Installments into Shopify Point-of-Sale: This allows retail merchants to provide in-store customers with the same payment flexibility available online.
- Completion of the U.S. rollout of Shop Cash: A rewards program enabling shoppers to earn Shop Cash on eligible Shop Pay purchases, which can be redeemed in the Shop app.
- Launch of Shopify Bill Pay: A new tool streamlining expense management by enabling merchants to manage and pay vendors directly within the Shopify admin.
- Completion of the previously announced sale of the Shopify Logistics business.
Second-Quarter Financial Highlights
- Gross Merchandise Volume (GMV) increased by 17% to USD 55.0 billion, representing an USD 8.2 billion increase compared to the second quarter of 2022, up 18% on a constant currency basis.
- Total revenue increased by 31% to USD 1.7 billion compared to the previous year, also up 31% on a constant currency basis.
- Merchant Solutions revenue increased by 35% to USD 1.3 billion, primarily driven by GMV growth and continued adoption of Shopify Payments.
- Gross Payments Volume (GPV) grew to USD 31.7 billion, constituting 58% of GMV processed in the quarter, compared to USD 24.9 billion (53%) in the second quarter of 2022.
- Subscription Solutions revenue increased by 21% to USD 444 million, primarily due to a higher number of merchants joining the platform and pricing adjustments for existing merchants.
- Monthly Recurring Revenue (MRR) as of June 30, 2023, increased by 30% to USD 139 million, driven primarily by pricing changes for existing merchants in April and continued growth in Standard and Plus merchants.
- Gross profit increased by 27% to USD 835 million, with a gross margin of 49.3% compared to 50.7% in the second quarter of 2022.
- Operating loss was USD 1.6 billion, including USD 1.7 billion in one-time items related to the sale of logistics businesses and severance. Excluding these charges, operating income was positive for the quarter.
- Adjusted operating income was USD 146 million, equivalent to 9% of revenue, compared to an adjusted operating loss of USD 42 million in the second quarter of 2022.
- Capital expenditures amounted to USD 21 million, up from USD 12 million in the second quarter of 2022.
- Free Cash Flow reached USD 97 million, accounting for 6% of revenues, compared to negative free cash flow of USD 87 million (7% of revenues) in the same period last year.
- Cash and marketable securities totaled USD 4.8 billion as of June 30, 2023, with a net cash position of USD 3.9 billion after considering outstanding convertible notes. Shopify Capital held USD 719 million in loans receivable and merchant cash advances outstanding as of June 30, 2023.
Technical Observation (on the daily chart)
Currently, the stock is near an important resistance zone of USD 68.00-USD 75.00, from where price has taken resistances in the past, therefor some short-term correction can be expected before the continuation of the uptrend. The RSI (14 period) momentum indicator is at a value of 69.41, with expectations of some consolidation. Moreover, the price is currently positioned above both the 21-day SMA and 50-day SMA trend-following indicators, which may act as dynamic short-term support levels.
As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Watch’ rating has been given to Shopify Inc. (NYSE: SHOP) at the current market price of USD 66.86 as of September 01, 2023, at 08:10 am PDT.
Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
How to Read the Charts?
The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.
The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.
The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.
The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.
Technical Indicators Defined: -
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
The reference date for all price data, currency, technical indicators, support, and resistance levels is September 01, 2023. The reference data in this report has been partly sourced from REFINITIV.
Abbreviations
CMP: Current Market Price
SMA: Simple Moving Average
RSI: Relative Strength Index
USD: United States dollar
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