Shopify, founded in 2006, is a Canadian multinational e-commerce company. It functions as a Software as a Service (SaaS) platform, providing merchants with tools to create customizable online stores. Shopify manages everything from product listings and payments to shipping. Today, Shopify is one of the most widely used e-commerce platforms globally, serving over 1.75mn merchants across roughly 175 countries.

 

+ The leading E-Commerce enabler. Shopify has positioned itself as the leading e-commerce enabler by offering an all-in-one platform enabling businesses to easily create, manage, and scale their online stores. Its comprehensive suite of services caters to businesses of all sizes. Shopify’s ability to streamline the e-commerce process has made it the global go-to platform for merchants. As the e-commerce sector continues to experience rapid growth and more consumers shift to online shopping, Shopify’s customer-aligned revenue model ensures that it captures a growing share of the market from the traditional retail market, driving both its revenue and the success of its merchants. Shopify’s GMV reached US$235.9bn in FY23, rising at a 5-yr CAGR of 42% (Figure 5).

+ Shopify payment driving revenue growth. With the ongoing boom in e-commerce, the demand for streamlined, efficient payment solutions is rising rapidly, positioning Shopify at the forefront of this trend. Shopify Payments has been the largest driver of the company’s Merchant Solutions revenue, growing 30% YoY in FY23. Its penetration of GMV has significantly increased from 40% in FY18 to 61% in 2Q24. We anticipate the increasing reliance on online transactions across global markets to continue to fuel Shopify’s revenue growth. Shopify Payments, as a built-in payment gateway, is designed to work seamlessly without requiring third-party integration, unlike competitors such as PayPal or Square.

+ Increased monetization in Subscription Solutions shows pricing power. For the first time in 12 years, Shopify has begun increasing monetization within its Subscription Solutions by raising its pricing tiers 30% on average. Additionally, a growing number of clients are opting for the high-margin Shopify Plus plan, which now accounts for 31% of Monthly Recurring Revenue (MRR), up from 22% in FY18. We expect Shopify Plus to continue expanding, particularly as more large global merchants join the platform, contributing to increased profitability in Subscription Solutions. Boosting monetization is essential for Shopify, particularly as it reaches a turning point in profitability in FY23.

 

We initiate coverage of Shopify Inc. with a BUY rating and a price target of US$105.

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