What’s Going On Here?After Shopify announced it made a profit for the first time last quarter, the Canadian ecommerce platform’s investors went on a stock market spending spree. What Does This Mean?Shopify makes the software that big-name brands like Kylie Cosmetics, Allbirds, and Staples use to power their online stores. And as the ecommerce industry grows, it stands to reason Shopify will too. That might be why investors have been so patient with the company – patience that was duly rewarded when, on Wednesday, Shopify announced it made $771,000 in profit last quarter. What’s more, a surge in Black Friday and Cyber Monday spending pushed revenue up 47% higher than the year before, beating investors’ expectations. Little wonder, then, that its shares went up by as much as 15% on Wednesday. Why Should I Care?For markets: Let’s get physical.
Overall, US retail sales are up 4% from a year ago. But that rise has been driven by online sales – up a massive 15% compared to the year before – from the likes of Shopify and Amazon. Physical retailers haven’t been quite as fortunate. In fact, the uptick on the world wide web comes at the expense of stores like Kohl’s, L Brands, and Bed Bath & Beyond – all of which just reported weak results for the last quarter. Eyes will be on Macy’s, Walmart, and Target – due to report in the coming weeks – to see if they can get one over on Amazon and Shopify.
Zooming out: Pull yourselves together.
Shopify isn’t the only company to have beaten expectations this earnings season: 71% of all companies that have reported earnings have topped forecasts. But while that may sound good, it’s actually below the five-year average. Companies tend to underpromise and overdeliver, and they’ve done the same this year – just less successfully than normal. Still, it’s not all bad news: US stocks are on track to report 0.7% higher earnings than the year before – the first signs of growth since this time last year. | 