Shopify Earnings: 3 Quotes You Should Know

Here are three quotes you should know from Shopify (TSX:SHOP)(NYSE:SHOP) stock third-quarter earnings results on October 29.

| More on:

Shopify (TSX:SHOP)(NYSE:SHOP) stock has done very well this year during the COVID-19 pandemic. Earnings at the company have soared along with e-commerce adoption among consumers. Nevertheless, on Friday, October 30, the day after the company reported its third-quarter 2020 financial results, the stock was down 4.36% or $56.57.

At the time of writing, the stock is trading for $1,239.84 and a price-to-earnings (PE) ratio of 594.84. During the past year, this e-commerce stock has gone from a 52-week low of $372.01 to a 52-week high of $1502.

The PE ratio tells us that shareholders have already priced in much of Shopify’s future growth into the share value. Moreover, Shopify stock has a price-to-book ratio of 32.05 and a price-to-sales ratio of 72.39. Thus, this is a risky stock to buy at its current market valuation.

Before you decide to buy Shopify, here are three quotes you should know from its third-quarter earnings release.

Shopify stock reports strong earnings during COVID-19

Shopify President Harley Finkelstein commented on the large increase in digital consumerism during the COVID-19 health emergency:

“The accelerated shift to digital commerce triggered by COVID-19 is continuing, as more consumers shop online and entrepreneurs step up to meet demand. Entrepreneurs will be the force in rebuilding economies all over the world, which makes it even more important for Shopify to innovate and build the critical tools that merchants need to succeed in a low-touch retail environment.”

The shift to e-commerce galvanized e-commerce trends and earnings growth at Shopify, strengthening the trend toward digital consumerism — the primary driver of Shopify’s strong price performance this year.

Merchants adopt in-store curbside pickup delivery

Finkelstein also discussed merchant strategies to blend e-commerce with brick-and-mortar retail:

“Entrepreneurs have proven time and again that they’re resilient and resourceful, and here’s how merchants are tackling their challenges head on in the midst of the COVID-19 pandemic. First, our merchants are creating new buyer opportunities. 39% of brick-and-mortar merchants in our English-speaking geographies adopted some form of local in-store curbside pickup delivery sources in Q2. That is up from 26% in early May to meet increasing local demand.”

Brick-and-mortar retail is not completely dead yet. Therefore, Shopify has helped traditional merchants adopt local in-store curbside pickup and delivery strategies to attract customers. These strategies will help Shopify continue to report strong earnings.

Shopify Capital increases loans by 79% during the third quarter

The official press release reported a strong uptick in merchant cash advances and loans from Shopify Capital:

“Merchants in the U.S., Canada, and the U.K. received $252.1 million in merchant cash advances and loans from Shopify Capital in the third quarter of 2020, an increase of 79% versus the $141.0 million received by U.S. merchants in the third quarter of last year. Shopify Capital has grown to approximately $1.4 billion in cumulative capital advanced since its launch in April 2016, with approximately $248.0 million of which was outstanding on September 30, 2020.”

With merchants struggling during the COVID-19 pandemic, Shopify Capital has stepped up to the plate to lend money to small businesses. This could be an area of risk or reward for the e-commerce platform.

On the one hand, investors are concerned about growing defaults amid economic uncertainty. Then again, Shopify has an incentive to promote promising businesses that use its platform.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Debra Ray has no position in any of the stocks mentioned.  Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify.

More on Tech Stocks

Rocket lift off through the clouds
Tech Stocks

2 Growth Stocks That Could Skyrocket in 2025 and Beyond

Wondering what types of stocks could rapidly rise in 2025? Check out these two stocks with substantial upside if they…

Read more »

up arrow on wooden blocks
Tech Stocks

The 3 Smartest Tech Stocks to Buy With $500 Right Now

Tech stocks can be seen as a bit risky, but these three have far less risk and more stability for…

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Tech Stocks

Shopify: A Must-Have Growth Stock for Your TFSA Now (and the Next 10 Years)

Shopify (TSX:SHOP) stock isn't just a top growth company, it's a titan worth owning in your decades-long TFSA fund.

Read more »

cloud computing
Tech Stocks

Best Stock to Buy Right Now: Manulife vs CIBC

Want the best stocks? These two are certainly the best options. But which is the better buy?

Read more »

profit rises over time
Tech Stocks

4 Reasons to Buy Constellation Software Stock Like There’s No Tomorrow

Constellation Software stock continued its climb upwards after recent earnings, and this only adds to its appeal.

Read more »

calculate and analyze stock
Tech Stocks

1 Stock That’s Just as Hot as Nvidia (Without All the Hype)

Nvidia stock may look like a strong option, but its valuation is through the roof. Enter this other under-the-radar stock.

Read more »

A plant grows from coins.
Tech Stocks

3 Growth Stocks Wall Street Might Be Sleeping on, But I’m Not

Don’t miss your chance to load up on these three beaten-down stocks.

Read more »

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »