Personal Finance

Why Shopify Inc. Stock Surged in 2016

SHOP Chart
SHOP Chart

SHOP data by YCharts

So what

In the most recent quarter, ended Sept. 30, Shopify's revenue grew 89% year over year, and its total transactions processed doubled to nearly $4 billion. Those transactions came from over 325,000 customers, up from 200,000 in Q3 2015, which includes not only thousands of small-scale entrepreneurs, but also some big names.

Share Image Generic

Image source: Shopify.

Shopify also announced a slew of new ways for its sellers to reach and interact with customers. During 2016, Shopify integrated mobile payments, made it possible for sellers to converse with customers and take payment via social media, and created a Shopify smartphone app for on-the-go sales processing. Shopify also increased its services offering to merchants through Shopify Plus for an added fee, which has also helped drive Shopify's revenue growth, while providing more tools and expertise to help merchants sell even more.

Now what

Looking to potential share price growth going forward, the big question will be whether Shopify can turn its massive sales and transaction growth into earnings. While the company's growth -- both in sales and in stock price -- is impressive, its losses have grown, and the company has guided for a $1 million to $3 million adjusted operating loss (excluding stock-based compensation expenses and related payroll taxes of $9 million) for the full year 2016.

However, management has said it believes the company could break even by the end of 2017 . If that does happen in such a short time, that would certainly be impressive, but either way, Shopify is a long-term bet, not one to be made on short-term earnings expectations. In the meantime, Shopify has some room to run until it has net positive earnings after the additional stock offering from mid-2016, which doubled its available cash reserves to around $400 million.

10 stocks we like better than Shopify

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Shopify wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 4, 2017

Seth McNew has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Shopify. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Personal Finance Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More