What Happened:
Shares of e-Commerce software platform Shopify (NYSE:SHOP) jumped 6.01% in the morning session after the company announced that Amazon will release an app in the Shopify app ecosystem, that will make it easy for U.S.-based merchants using Amazon's fulfillment network to integrate the "Buy with Prime" feature into their Shopify Checkout process. This means Prime members shopping on Shopify merchants' websites will be able to select the "Buy with Prime" option and seamlessly transition to Shopify Checkout to finalize their orders.
In another positive development, Canaccord analyst David Hynes upgraded Shopify's rating from Hold to Buy and raised the price target from $60 to $70. The target price implied a potential 10% upside from where shares were traded when the upgrade was announced.
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What is the market telling us:
Shopify's shares are very volatile and over the last year have had 41 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was four months ago, when the stock gained 12.9% on the news that the company reported gross merchandise value, revenue, and operating profit that beat expectations pretty strongly this quarter. Revenue growth was strong and it will continue in the next quarter as the company guided Q2 to feature a similar growth rate vs. Q1 (in-line with consensus expectations). Shopify announced that it is selling its logistics business to Flexport (expected to close in 2Q23), and Shopify will receive 13% equity interest in Flexport.
The market is likely cheering this deal because it should improve the company's operating leverage and capex profile. Lastly, Shopify announced layoffs that will impact roughly 20% of its workforce.
Overall, we think this was a really good quarter that should leave shareholders feeling very positive.
Shopify is up 82.4% since the beginning of the year, and at $65.06 per share it is trading close to its 52-week high of $70.37 from July 2023. Investors who bought $1,000 worth of Shopify's shares 5 years ago would now be looking at an investment worth $4,470.
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