Shopify was founded back in 2004. In 2015, the company went public and made an offer of $17 per share. Trading started at $28, which meant that traders and investors were positive about the company’s growth.
Today in July 2019, the shares of Shopify are trending at $315 per share. Only four years have gone by, yet the value of each Shopify stock has risen by more than 1700%.
Here, we will analyze what makes Shopify a good investment, particularly the five reasons why its stock has risen this year from last year. As of the closing time of trading on December 31, 2018, Shopify’s stock price was at the range of $138.
Ready to Rival Amazon
In July 2019, Shopify made an announcement that it will build fulfillment centers in the United States. A fulfilment center is a warehouse that takes care of keeping, coding, and shipping items sold by many different sellers.
This is the model that Amazon uses for its program called Fulfillment by Amazon or FBA. This is a good business model since sellers no longer have to worry about shipping.
This also opens doors for sellers to offer more affordable shipping rates, since Shopify will surely work with major shipping companies like UPS, DHL, and FedEx for lower shipping rates.
Because of this, Shopify sellers can expect higher sales and faster shipping. And if Shopify sellers experience their sales to hit the skies, Shopify takes a cut from each transaction, the average of which is 2.9% + $0.30.
Earnings from the transaction fees do not include the money earned from the monthly subscription. The good thing about Shopify is that buyers do not have to choose from a single site, as Shopify is not an online market place but rather an online store platform. Sellers will also not compete with lower prices like they do in Amazon.
Revenue Up by 50%
This is no easy thing to achieve. Most of the time, big companies crawl in sales and only experience between 10% and 15% increase in sales revenue year after year.
But Shopify is not your average company. In the first quarter of 2019, the revenue increased by 50% year over year. At that time, the sales were at $320.5 million. Although this revenue increase is lower compared to the 54% increase between quarter 3 and quarter 4 of 2018, a 4% decrease is not that bad.
Also, the $320 million sales are also above the expectation of stock analysts. They predicted that Shopify would only meet somewhere around $310 million at the closing of the first quarter of 2019. But Shopify outperformed these predictions.
This performance is because of Shopify’s high sales in its subscriptions. Earnings from subscriptions have a total of $140.5 million in the first quarter.
The sales from the subscriptions went up by 40% if compared to the last quarter of 2018.
This revenue includes sales from themes, monthly subscriptions, apps, and domain name registration.
Shopify Plus Upgrades
Shopify announced in the Shopify Unite 2019 event several upgrades that will happen to its Shopify Plus platform.
After the upgrade, sellers can now sell globally and charge in their local currencies. This is a huge plus to online sellers who want to bump up their sales locally, as there was a time when Shopify sellers can only use a few currencies available in the system.
There are apps that show the customers the prices in their local currency, but the seller will still receive dollars.
Now that sellers can charge in different currencies, it will be easier to manage their sales and reach out to more clients on an international scale.
Also, Shopify is adding several languages to its platform, which opens new opportunities to sellers to offer their products in new markets. Among the new languages that will be offered are Danish, Dutch, Swedish, Malay, Traditional Chinese, and others.
The most important in this upgrade is the translations applications programming interface. This is a program that will translate each store into the chosen language of the user or seller and will be standard among all the online stores built in the Shopify platform.
Easier App Development
Though this may sound too technical to some, this is important progress made by Shopify this year. Basically, Shopify will introduce new capabilities in its GraphQL.
GraphQL is a program that makes computers talk faster, so the users have a better online experience. This is important because it has something to do with the load times of both the seller and the user. Faster computer communication means faster response times, and faster ways to manage a business.
Also, part of this upgrade is that app developers will find it easier to build apps that can serve the needs of Shopify sellers. Shopify created a change in its internal system so that the platform can work on ten new open-source code libraries.
With these changes, sellers can expect more apps that they can use to attract buyers to make a purchase. And if there are more purchases, Shopify will have higher revenue.
Basic and Advanced Changes on Stores
This year, Shopify is introducing changes to the functionality of the stores that will get sellers excited. The changes will allow online sellers to modify their stores without writing a single computer code.
Among these changes are:
- Sections on every page – before the change, sellers can only change parts of the page sections on the home page. But now, they can do it on every page. So if a seller wants to add an advertisement section on each page, he can do it now.
- Master pages – merchants can now decide and tell the system which of the pages will contain what items. These changes can be applied to all of the store’s pages or just a select few.
- Content portability – the content of the store will no longer be inside the themes. The problem with Shopify before was that the content of your store sticks with the theme. If you change the theme, you have to re-upload all the products and pages. Now, you can switch themes, and all the content will still be there.
What this means is that Shopify has more to offer, and increase the number of new subscriptions to new merchants. It can also sell more store themes because it is easier to change them now.
The stock of Shopify is going higher because the management is doing more and more to improve its products and services. To take on Amazon is a huge challenge, but this will be a game-changer in the online retail industry.
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