Shopify's Blowout Quarter Is Great News for Amazon

The Canadian e-commerce company benefited big from the latest round of stimulus payments.
Anthony RussoApr 28,2021,17:56

Shares in Shopify (NYSE: SHOP) soared 11% intraday Wednesday after it far exceeded Wall Street’s expectations for the first quarter.

In a statement today, the Canadian e-commerce company said it more than doubled its revenues year-over-year to $988.6 million in the quarter on adjusted earnings of $2.01 per share. The Street consensus called for revenues of $865.5 million on profits of just 73 cents.

Shopify generated $37.3 billion gross merchandise value in the quarter, an increase of 114% from the same period of the preceding year. It noted that its GMV benefited from Joe Biden signing a $1.9 trillion stimulus relief package into law in early March that included direct payments to Americans. Meanwhile, Shopify said that the “benefit” from the latest round of stimulus ended in early April.

Overall, Shopify collected $1.26 billion in net income thanks to a $1.3 billion “unrealized gain” from its investment in fintech firm Affirm Holdings (Nasdaq: AFRM), which completed its IPO in January.

“Shopify’s momentum continued into 2021 as digital commerce tailwinds remained strong and merchants took advantage of the range of capabilities offered by our platform,” Amy Shapero, the chief financial officer of Shopify said.

“We are focused on building a commerce operating system that will help shape the future of retail. Our merchant-first business model positions us to capture the massive opportunity presented by the growth of digital commerce, benefiting both our merchants and Shopify.”

Stage Set for Amazon

Given Shopify’s strong performance, that could mean a big quarter is to come for fellow e-commerce giant Amazon (Nasdaq: AMZN) as well, which will post its financial report after the markets close Thursday. Wall Street sees revenues of $104.5 billion on earnings of $9.54 per share for Amazon.

And some analysts are bullish ahead of Amazon’s earnings. In particular, Wedbush’s Michael Pachter kept his buy rating on Amazon with a $4000 price target.

“We believe that a more stable economy, continued imposition of shelter-in-place orders in many of Amazon’s markets, continued expansion into the very large grocery segment, and outstanding execution likely drove strong results in Q1,” he said, as cited by Barron’s today.

“In addition, Amazon Pharmacy (launched February 2) represents a U.S. [addressable market] of around $600 billion, so any market share gains could provide further upside.”

Plus, investors (like we just saw with Shopify), should also consider the potential positive impact from the latest round of stimulus in regards to Amazon.

Intraday Wednesday, Amazon was trading at $3,474.31 per share, up 2% from Tuesday’s close.

Shopify noted that its full-year outlook for 2021 remains unchanged from earlier this year; it noted that it expects its revenues to “grow rapidly” but at lower levels than 2020.

Topics:Amazon, Shopify.