3 Reasons Shopify Stock is a Buy: Beyond the 21% Surge in a Month
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Shopify SHOP shares have appreciated 21.1% in the past month, outperforming both the Zacks Computer & Technology sector and the Zacks Internet Services industry. Over the same timeframe, the sector and industry have gained 6.3% and 9.8%, respectively.
The outperformance in SHOP’s shares can be attributed to the positive impact of the 50-basis-point rate cut by the U.S. Federal Reserve in September. The higher-than-expected cut is expected to have aided the small and medium businesses, which form Shopify’s major merchant base.
The growing investor interest in Shopify stock can be attributed to the upcoming holiday season. It had a blockbuster 2023 season as merchants hit a record $9.3 billion in sales over Black Friday & Cyber Monday weekend, up 24% over 2022. We expect the momentum to continue this year.
One Month Performance
Image Source: Zacks Investment Research
SHOP Shares Ride on Growing Merchant Base
Shopify’s expanding merchant base is noteworthy. This has been driving its Gross Merchandise Volume (GMV), which surpassed $1 trillion cumulatively. Offline business surpassed $100 billion in cumulative GMV since the launch of Shopify POS.
Merchant-friendly tools like Shop Pay, Shopify Collective, Shopify Audiences, Shopify Capital and Shop Cash offers are helping it win new merchants regularly in a challenging economic environment.
In the second quarter of 2024, Shop Pay processed $16 billion in GMV and accounted for 39% of SHOP’s Gross Payments volume (GPV). In the reported quarter, GPV grew to $41.1 billion, constituting 61% of GMV processed.
Shopify recorded the highest-ever B2B GMV month with a 140% year-over-year increase fueled by the growth of Plus merchants.
Shopify plans to improve the operating efficiency of its point-of-sale offering by introducing features, including a new remote smart grid layout editor, omnichannel return rules, and the ability to stack multiple discounts at checkout, making it easier for merchants to customize their promotional strategies.
Expanding Enterprise Footprint to Aid SHOP Stock
Shopify’s expanding enterprise clientele is a key catalyst. The growing number of companies like QVC, Barnes & Noble, Away, TravisMathew, Topps, Vince Camuto, Casper, and Toys “R” Us on its platform is noteworthy. These brands are launching online and offline with Shopify, which, on a combined basis, includes more than 130 locations across four regions.
Integration of Shop Pay Installments into the point-of-sale terminal and general availability of Pro makes it easier for merchants to discover and engage their customers. This is expected to further boost its footprint among enterprises.
Shop Pay offers comprehensive order tracking via the Shop app and allows buyers to earn Shop Cash redeemable for purchases within the app. This builds greater customer engagement and unlocks additional opportunities for Shopify’s enterprise customers to reach their customers.