Categories Analysis, Retail, Technology

Shopify (SHOP): Three factors that work in favor of this ecommerce company

The company launched Shopify Payments in Finland, Switzerland and Portugal in Q3

Shares of Shopify Inc. (NYSE: SHOP) were down slightly on Wednesday. The stock has dropped 72% thus far this year. Despite this tumble, there is a positive sentiment in general surrounding the stock and the company’s long-term growth opportunity. Here are three factors that work in favor of the ecommerce company:

Sales growth

Shopify continues to deliver sales growth. Total revenue for the third quarter of 2022 increased 22% to $1.4 billion compared to the prior-year period. Monthly Recurring Revenue (MRR) increased 8% year-over-year. Gross Merchandise Volume (GMV) increased 11% to $46.2 billion. Subscription Solutions revenue grew 12% YoY, driven by growth in MRR while Merchant Solutions revenue rose 26%, helped by higher GMV penetration of Shopify Payments, Shopify Capital and Shopify Markets.

During the Black Friday-Cyber Monday weekend, Shopify generated sales of $7.5 billion, up 19% from last year. There are concerns over the slowdown in Shopify’s sales growth and the inflationary environment which has impacted consumers’ discretionary spending. However, there is optimism that once the economic environment improves and the company’s new offerings scale up, sales will gain momentum.


New tools and services

Shopify continues to roll out and expand tools and services to help merchants reach more customers and grow their business. One such tool is Shopify Markets which allows merchants to identify, set up, launch and manage their international markets from a single storefront. To date, over 175,000 merchants worldwide have used this tool to launch their international businesses.

During the third quarter, the company launched Shopify Collabs, which brings brands and creators together. It allows creators to monetize their talents by partnering with brands and helps merchants find new customers. Shopify has been offering certain high-value features through its Plus package and this strategy has been paying off as its Plus base continued to expand through the third quarter. Shopify Plus’ GMV growth in Q3 outpaced overall GMV growth.

Shopify also launched its new mobile hardware device, Point-of-Sale Go. POS Go allows merchants to scan barcodes, accept tap, chip and swipe payments, and use Shopify POS all from one handheld device.

Another tool is Shopify Audiences, which helps Plus merchants find high-intent customers. Since its launch, Audiences has helped in improving conversion rates and return on ad spend for the Plus merchants who have opted for it. As these tools and services scale up, they will help drive growth for the company.  

International expansion

Shopify continues to expand its geographic reach while helping merchants go global. On its quarterly conference call, Shopify said US merchants utilizing Markets now sell into an average of 14 additional countries. The company launched Shopify Markets Pro, a cross-border solution which helps merchants scale their global expansion to over 150 countries without additional costs.

During the third quarter, Shopify saw international retailers outside of North America grow its overall merchant mix, making up 45% of all merchants. The company launched Shopify Payments in Finland, Switzerland and Portugal. It also launched Shopify Capital in Australia and Shopify Shipping in Italy and France.

Click here to read the full transcript of Shopify’s Q3 2022 earnings conference call

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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