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If you want to invest in the e-commerce sector, take a look at Shopify stock. The company shows good financial results and is attracting more and more new users. However, it is worthwhile to study the platform's quotation history and analysts' forecasts before you start investing.
Shopify is a Canadian software developer. The company was founded in 2006. Its founders were Ottawa Tobias Lütke, Daniel Weinland and Scott Lake. Initially the developers wanted to open an online snowboarding equipment store, so they developed a platform using the Ruby on Rails framework template themselves. In June 2006, the project was launched as Shopify. In 2009, the Shopify App Store was launched. A year later, the company launched a smartphone app for the Apple App Store.
Shopify stock was listed on the stock exchange in 2015. At the time of its initial public offering, the asset was trading at $17. After the IPO, the Stock Shopify asset appeared on listings on the New York Stock Exchange and the Toronto Stock Exchange. After the initial public offering, the company's value increased by $131 million.
The company operates in the field of e-commerce. Its main activity is the development of software for online stores. The Shopify POS application is available for the platform's clients. It allows them to synchronize data and inventory, which allows them to manage offline, land-based stores. At the same time, owners of these stores can manage their business from any device using a single account.
The company provides customers with a starter package that includes ready-made online store design templates, marketing and SEO tools. Users of the Shopify platform can use modern tools to start an online store literally in a few clicks.
Shopify's stock price hit an all-time high in November 2021. By August 2022, SHOP's stock price had fallen by about 80%. Analysts attribute this drop in stock price to a decline in interest in the e-commerce industry since the pandemic began. A rising interest rate in the summer of 2022 is also a bad sign for investors.
Shopify's stock price in the second half of 2022 does not show strong growth. The CFO of this software developer said during the release of financial statements for the second quarter of this year that the company is now looking for ways to cut costs. One option to minimize costs is to lay off 10 percent of the company's employees.
On June 29, Shopify held a 10:1 stock split. At the beginning of June 2022, the asset was trading at $377. After the split procedure at Shopify, the stock became worth 50 times less.
On August 9, 2022, Shopify's share price fell 7.6% due to alarming expectations from Reuters. This resource published data suggesting that the platform's customer growth could slow significantly in the near future. To refute these concerns, Shopify needs to at least double the number of new customers in the second half of 2022 compared to the first half of this year.
In the second quarter of 2022, the company's revenue increased 16% year over year to $1.3 billion. Monthly recurring revenue reached $107.2 million, as of June 30, 2022. For the same period of 2021, the figure was $95.1 million. This increase in monthly recurring revenue can be explained by the increased number of sellers on the platform. Gross profit rose to $655.6 million, up from $620.9 million in Q2 2021.
Subscription Solutions brought in $366.4 million in revenue in Q2 2022. Merchant Solutions revenue reached $928.6 million, up 18% year-over-year. This is driven by GMV growth and the continued introduction of new technology solutions such as Shopify Payments, Shopify Capital and Shopify Markets.
Considering the technical analysis data, we can establish that analysts still see Shopify stock as a promising asset going forward. For example, in August 2022, the price to sales (P/S) ratio was at 10.3. In 2020, that ratio was a P/S of 60.9. This means that investors can invest in this asset, focusing on profit in the long term. Thus, RBC analysts forecast the growth of the company's quotes to $40 in July 2023.
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