Shopify (NYSE: SHOP) grabbed my attention this morning when it announced a new deal with Walmart (NYSE: WMT). While the new deal is a wonderful development for Shopify, it is not what made me fall in love with the company. Shopify, to put it simply, is what every business without an eCommerce presence needs. Seriously. If there is nothing else the COVID-19 pandemic has done it has proven the need for technology and eCommerce.
If you don’t believe me just consider the April retail sales figures. While total U.S. retail sales fell more than -14% eCommerce channels saw a similar increase. Retailers from Target to Walmart, from Home Depot to Lowes, eBay to ETSY and Best Buy to Tractor Supply Co are reporting strong, sometimes in the triple-digit range, surges in their eCommerce businesses.
The best part is that retail and tech analysts agree, the shift to eCommerce is an acceleration of existing trends that will not abate in the wake of the pandemic. eCommerce is going to be a make-or-break feature for most if not all businesses in the coming years.
What Is Shopify?
Shopify is a cloud-based eCommerce platform offering white-label solutions for businesses across all marketing channels. If you are in business and you want to reach customers via eCommerce Shopify is for you. Solutions include online store-fronts, buy-now buttons that can be added to any website or blog, point-of-sale options for on-the-go merchants, and sales channels designed specifically for social media.
- Shopify earns revenue through recurring monthly fees for its platform as well as transaction fees for some services.
The news today, the deal with Walmart, is one that promises to aid both companies. According to a press release from Walmart, it is partnering with Shopify to create the Walmart Marketplace. The partnership will allow Shopify sellers to list their products on Walmart.com, Walmart says it plans to onboard 1,200 sellers this year alone. Notably, Walmart discontinued its investment in Jet.com about a month ago because of the success it was having with eCommerce and Walmart.com.
"As we launch this integration with Shopify, we are focused on U.S.-based small and medium businesses whose assortment complements ours and have a track record of exceeding customers’ expectations. We’re excited to be able to offer customers an expanded assortment while also giving small businesses access to the surging traffic on Walmart.com,” said Walmart.
This Is One Hot Growth Story
Shopify has been growing revenue at a high-double-digit rate since the second quarter of 2016. The negative, if you can call it that, is that quarterly growth has slowed from 90% YOY in 2016 to about 45% in 2019. The consensus for 2020 and 2020 is another slowdown, to 35% and 37%, but that does not include today’s news. Today’s news will reaccelerate revenue growth and possibly back to the 50%+ level investors have become accustomed too.
The analyst’s community is only neutral on this stock, perhaps because the growth trajectory was slowing, but that is about to change. With this new deal on the books, the analysts are going to have to rethink their revenue targets and that means upgrades. With 20 of the 33 analysts rating the stock neutral, there are plenty on the sidelines, when they start upping their ratings this stock could see a real boost. And the technical picture is already robust.
The Technical Outlook: Bullish, Buy Buy Buy!
The Shopify chart is text-book buy, it’s that simple. The stock has been in an uptrend, the uptrend corrected, support at the moving average held, and a bullish catalyst sparked confirmation of the trend. The indicators are consistent with a buy with only one caveat; MACD has yet to confirm. With MACD still bearish I urge a little caution when entering this stock but still view it as very bullish. With price action supported by a robust outlook and a new catalyst to drive it higher, it is only a matter of time before shares of Shopify move up to retest their all-time high and break out to a new high.
13 Stocks Institutional Investors Won't Stop Buying
University endowments, pension funds, sovereign wealth funds, hedge funds, and other institutional investors pour money into a group of 13 elite stocks.
These institutional investors don't get easily swayed by hot stocks that are popular with retail investors. You probably won't see a Tesla or a SnapChat in this group because institutional investors know that these "popular kid" stocks almost always aren't great investments. However, you will find some excellent companies on this list backed by real earnings and real fundamentals.
We had to comb through every 13D and 13F filing that institutional investors have filed with the SEC in the last quarter to identify these stocks. After reviewing more than 5,000 filings, we have identified 13 companies that institutional investors have been buying left. Big money investors are pouring hundreds of millions of dollars into these stocks.
View the "13 Stocks Institutional Investors Won't Stop Buying".