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Shopify Stock Rises on E-Commerce Boom: Will It Continue?

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Shopify (NYSE:SHOP) stock has been on fire lately due to the e-commerce boom amid the coronavirus pandemic. The COVID-19 outbreak boosted the demand for Shopify’s services, which drove its traffic. At one point, Shopify’s traffic level was compared to Black Friday. The company helps small and medium-sized businesses set up e-commerce websites. Shopify also helps its merchants and customers with digital payments and shipping services. The company has been building a distribution network to help its merchants store and deliver products. Shopify’s distribution centers will likely pose a threat to Amazon.

Besides a surge in the demand for Shopify’s offerings, it posted impressive quarterly results, which added to the stock price growth. The recent partnership with Walmart (NYSE:WMT) also fueled the stock price.

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Shopify and Walmart deal

On June 15, Shopify inked an e-commerce deal with Walmart. Shopify’s merchants will sell their products on Walmart’s platform. Notably, Shopify stock has risen over 10% in just three days.

Walmart already has roughly 45,000 merchants on its e-commerce website. Adding Shopify’s 1,200 merchants will help bolster Walmart’s online sales. The deal will also help Shopify’s small and medium-sized businesses drive their sales on Walmart’s website.

Meanwhile, Piper Sandler analyst Brent Bracelin upgraded Shopify stock and gave an “overweight” rating from a “neutral” rating. The analyst said that Shopify’s revenues could grow four-fold to $12 billion in the next five years, as reported by The Fly.

Shopify’s remarkable Q1 results

Shopify delivered better-than-expected numbers in the first quarter. The company reported an adjusted EPS of $0.19 in the quarter, which was higher than the earnings of $0.06 last year. Revenues of $470 million gained 47% YoY. The double-digit revenue growth came from a 33.6% YoY rise in its subscription solutions revenue and a 57% YoY growth in merchant solutions revenue. The company’s MRR (monthly recurring revenue) also increased amid a rise in the number of merchants on the Shopify platform. The company’s GMV (gross merchandise volume) also rose by 46% YoY in the quarter.

Will the stock continue to rise?

Shopify stock has had a significant run-up this year. The stock has jumped over 105% since the beginning of the year. In comparison, the S&P 500 has fallen by around 4%. Shopify stock is still trading 3.2% below its 52-week high of $844.00 and 190.2% above its 52-week low of $281.69. At Wednesday’s closing price, the company’s market cap was $97.1 billion.

Although Shopify stock is close to hitting its recent high, I think that the stock still has upside potential. The stock could continue to grow as e-commerce gains traction. The company’s strong e-commerce platform, rising demand for its services, and operational efficiencies should drive its stock in the coming quarters.

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