Why Shopify Stock Jumped 29% in the First Half of 2021

What happened

Shares of Shopify (NYSE: SHOP) climbed 29.1% during the first half of 2021, according to S&P Global Market Intelligence. The rally built on the market-crushing gains the growth stock has delivered since early 2020 as Shopify helped millions of new merchants join the e-commerce revolution in the face of the pandemic.

The advance for the first half of this year was more than double the 14.4% returns of the S&P 500 and left Shopify stock near an all-time high. The results were driven by accelerating revenue growth that brought the company a step closer to consistent profitability.

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Image source: Getty Images.

So what

Shopify delivered a breakout performance in 2020, with revenue that grew 86% year over year, but (perhaps more importantly) generated a full-year profit compared to a loss in 2019.

Growth accelerated in the first quarter of 2021, with revenue of $988.6 million, up 110% year over year, and adjusted net income of $254.1 million, up more than elevenfold. This was driven by gross merchandise volume (GMV) that soared 114% to $37.3 billion and subscription revenue that jumped 71%.

Shopify also fortified its cash position early in the year with a secondary stock offering that raised more than $1.5 billion. The company has a rock solid balance sheet with more than $7.8 billion in cash and marketable securities.

It isn't just the company's strong financial position that boosted its stock price. At its recent annual developer conference -- Shopify Unite 2021 -- it closed out the first half of the year with a bang. The company announced the largest upgrade ever to its developer platform, which will provide a host of new capabilities for merchants, giving them the flexibility to customize their shopper experience more than ever before.

Now what

Shopify isn't resting on its laurels. The company continues to introduce new hardware and software solutions that not only bring new merchants into the fold but also provide incentives for existing customers to stick around. Its client base now numbers more than 1.7 million businesses worldwide, up from just 1 million in late 2019.

Management is doing its best to temper expectations in the wake of its record-setting performance last year. The company expects to "grow revenue rapidly in 2021, but at a lower rate than in 2020." Shopify is also forecasting a surge in gross profit this year, but plans to invest "aggressively" in its future growth.

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Danny Vena owns shares of Shopify and has the following options: long January 2023 $1,140 calls on Shopify and long January 2023 $1,160 calls on Shopify. The Motley Fool owns shares of and recommends Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on 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.


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