Shopify (TSX:SHOP) Partners With Google, Stock Climbs. Worth A Buy?

May 20, 2021 01:11 AM AEST | By Raza Naqvi

Shopify (TSX:SHOP) Partners With Google, Stock Climbs. Worth A Buy? — Image source: ra2 studio, Shutterstock

Shopify-Google Deal – Key Insights

The coronavirus pandemic has created a huge demand for online shopping and in that light, Google is trying to ramp up its e-commerce strategies. According to the data platform Statista, global e-commerce sales amounted to US$ 4.28 trillion in 2020 and it is projected to reach US$ 5.4 trillion in 2022.

The latest partnership with Google is likely to enable 1.7 million Shopify merchants to reach potential customers. Since Amazon is competing with Google on search ads, partnering with Shopify will help the company to keep the US e-commerce giant at bay.

Alphabet Inc, the parent company of Google, holds a market cap of about US$ 1.5 trillion and is one of the most valuable companies in the world. In 2020, Alphabet generated a total revenue of US$ 183 billion and of that, 80 per cent revenue came from Google's ads business.

Shopify Inc (TSX:SHOP)

As per TMX, the e-commerce company’s market cap is about C$ 154 billion and it holds a debt-to-equity (D/E) ratio of 0.12.

Shopify shares grew by about two per cent in the last week. Surpassing the TSX 300 Composite Index, the e-commerce stock surged by 26 per cent in the past year.

On Tuesday, Shopify stock was down by 28 per cent from its 52-week high of C$ 1900.58 (February 10, 2021). Since the e-commerce industry is expected to boom amid surging coronavirus cases, the stock might propel in future.

1-year chart of stock performance, volume and moving average of Shopify (Source: Refinitiv)

In Q1 2021, Shopify’s total revenue grew by 110 per cent year-over-year (YoY) to US$ 988.6 million. In the same period, its gross profit growth accelerated to US$ 565.1 million.

Shopify offers a 22.5 per cent return on assets and 26.4 per cent return on equity, as per TMX.

The above constitutes a preliminary view and any interest in stocks should be evaluated further from investment point of view.

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