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Shopify Inc. shares soared 10% on Wednesday, on track to notch a record high as the company showed that it’s benefiting from a surge in online shopping due to COVID-19.
The company easily topped second-quarter earnings and revenue expectations as it capitalized on the boom in digital activity. Gross merchandise volume, or the value of what was sold on the Shopify SHOP, +8.79% platform, more than doubled from a year earlier to reach $30.1 billion, whereas analysts surveyed by FactSet had been looking for $19.9 billion.
Though Shopify noted in its news release that GMV growth accelerated in the early part of the quarter before decelerating in June and so far in July, the company also pointed to signs of momentum that could carry forward even after the pandemic subsides. Shopify disclosed that the number of new stores created on its platform was up 71% in the second quarter relative to the first quarter.
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Shopify offered a 90-day free trial of standard plans that ended in late May, so the company expects sellers who took advantage of that offer to become paid merchants by the end of August, meaning that Shopify will be able to earn a subscription fee from their business.
While Shopify saw a 29% sequential decline in GMV originating from point-of-sale systems—basically in-store volume—the company said that point-of-sale GMV began to recover in June and was approaching February levels by the end of the month, with further growth in July, as more businesses reopened their stores.
“Certainly, we are seeing more GMV flow back through physical retail than we did in the beginning of the pandemic,” Chief Operating Officer Harley Finkelstein said on Shopify’s earnings call, though he noted that many merchants are adopting “a new type of resilient model” in which they sell both online and offline, while also incorporating things like pickup and delivery that blend the two modes of shopping.
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Shopify generated second-quarter net income of $36 million, or 29 a shares, versus a loss of $28.7 million, or 26 cents a share, a year prior. Adjusted earnings per share rose to $1.05 from 10 cents, whereas analysts were looking for just a penny in EPS.
Revenue for the quarter nearly doubled from the comparable period a year ago, hitting $714.3 million and coming in ahead of the FactSet consensus, which called for $511.4 million.
Shopify’s stock has been a big winner during the pandemic, rising 174% so far this year and 70% over the past three months. The S&P 500 SPX, +0.78% is up 0.5% on the year and 10% in a three-month span.
