Shopify (NYSE: STORE) The stock is up 37% in 2024, according to data provided by Standard & Poor’s Global Market Intelligence. The market is becoming more enthusiastic about the e-commerce platform as it continues to report strong growth and improving profitability As the e-commerce market grows, moderate inflation could boost consumer spending.
Shopify is the infrastructure behind millions of e-commerce retailers. Its primary client is a small or medium-sized business that signs up for a complete package that includes a website and e-commerce functionality, but it has expanded to offer multiple types of packages and individual services that attract businesses from larger clients as well.
It’s been a bumpy road over the past few years as it weathered accelerating acceptance of the pandemic, built a lot to meet dwindling demand, and then shed unnecessary infrastructure. It landed in a sweet spot, and became profitable again as it expanded on a more linear path.
Revenue rose 26% year over year in the third quarter and beat expectations Operating income More than doubled to $283 million. It has expanded free cash flow margin every quarter this year, and management is guiding for similar performance in the fourth quarter.
Shopify is growing profitably, but its growth story is far from over. It has identified multiple areas to focus on expansion, such as international, where it is the fourth largest platform for e-commerce sales. International gross merchandise volume (GMV) rose more than 30% in the third quarter, higher than the company’s total of 23.6%, and international merchants are gaining value from joining the platform.
Traders who joined the Managed Markets program, which offers a complete international setup, sold their products to an average of 83 countries and saw an increase in international sales of more than 40% on average. Shopify is also expanding its product assortment in international locations around the world.
It also adopts an omnichannel model and offers more complete solutions to retailers both online and offline, and its offline GMV exceeded the company’s total in the quarter as well.
The only real drawback here is the stock’s valuation. Shopify stock trading for the rich One-year forward P/E ratio From 54. If Shopify has years of growth ahead, which it does, investors can still expect the stock to rise over time. Some of the growth is built into that, but it will eventually outgrow it, and the stock will likely reward patient investors.
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