Categories Analysis, Retail

Shopify (SHOP) does not expect the momentum seen in 2020 to continue in 2021

In 2021, Shopify expects Subscription Solutions revenue growth to benefit from a higher number of merchants joining the platform

Shares of Shopify Inc. (NYSE: SHOP) stayed in red territory on Wednesday. The stock has gained 162% over the past 12 months. The company reported strong results for the fourth quarter of 2020, exceeding market expectations, but indicated that the strong trends seen in 2020 amid the COVID-19 pandemic would begin to normalize in 2021 as vaccines are rolled out and the health crisis subsides.

Quarterly numbers

Total revenue increased 94% year-over-year to $977.7 million helped by growth in both Subscription Solutions and Merchant Solutions. Subscription Solutions revenue rose 53% helped by a higher number of merchants joining the platform while Merchant Solutions revenue witnessed a triple-digit growth fueled by growth in Gross Merchandise Volume (GMV).

Monthly Recurring Revenue (MRR) saw a 53% growth as more new merchants joined the platform and also benefited from incremental new revenue from the Retail POS Pro subscription offering. Adjusted EPS more than doubled to $1.58 in the fourth quarter.

Key growth trends

As ecommerce gains prominence, omnichannel capabilities become more important for businesses. Shopify is helping merchants find new buyers through sources like Facebook Shops, Pinterest and TikTok and it is also facilitating easy payment options through other channels.

The company made Shop Pay available on Instagram earlier this month and will roll it out on Facebook over the coming weeks. Facilities like buy-online-pickup-curbside and buy in-store ship to customer as well as local delivery are all helping in improving the shopping experience for customers.

Shopify also sees meaningful opportunity for international expansion. In 2020, GMV growth by international merchants outpaced overall GMV growth and the international merchant base increased within the overall mix. The company continues to localize its platform across various regions making it easier to do sales both cross-border and from mobile devices.


In 2020, Shopify benefited from the acceleration in e-commerce driven by the pandemic which led to more merchants joining its platforms and adopting its solutions thereby driving growth in GMV. These trends have significantly expanded the prospects for digital commerce.

However, in 2021 as vaccines are rolled out and restrictions ease, the economic environment is likely to see an improvement. In this scenario, some of the consumer spending could move towards offline retail and services and the acceleration seen in ecommerce during 2020 could normalize.

In 2021, Shopify expects Subscription Solutions revenue growth to benefit from a higher number of merchants joining the platform. This number, however, will be lower than 2020 but higher compared to any year prior to 2020. The company also does not expect the surge in GMV witnessed during 2020 to repeat in 2021.

Click here to read the full transcript of Shopify Q4 2020 earnings conference call

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