Can Shopify sustain its boom momentum?

Stock’s 175% ascent came as shoppers went online in first half of pandemic

After a dizzying pandemic-induced rally in 2020, investors in e-commerce giant Shopify Inc. are wondering what comes next.

The Ottawa-based company is now Canada’s most valuable company, trading at more than twice the peak value of BlackBerry Ltd. in 2008, which was once the country’s tech darling. Its 175 per cent ascent this year has been helped in no small part by a surge in demand for online shopping as consumers around the world were housebound by COVID-19 lockdowns.

“The looming question for Shopify and really all e-commerce related businesses is can they sustain that momentum that we’ve seen in the early half of the year into the second half, especially as stimulus is tapered off here in the United States,” Samad Samana, an analyst with Jefferies LLC, said last week.

South of the border, the shine is coming off some tech stocks that investors once thought were early pandemic winners. Last week, cloud-software provider Fastly Inc. plummeted to its worst session on record after reporting a revenue warning for the third quarter. And Netflix Inc. slumped after it added few new customers since April.

Shopify is expected to report third-quarter revenue of $663.5 million, which represents growth of about 70 per cent from a year earlier, according to data compiled by Bloomberg.

Gross merchandise volume, which represents the value of all goods sold on the platform, is also seen growing more than 70 per cent to $26.1 billion, according to a Bloomberg Consensus estimate. Any forward-looking commentary will also be closely scrutinized after the company suspended full-year guidance in April.

“Given the elevated spending trends and outsized tailwinds to e-commerce adoption driven by COVID, and now with increasing signals of these tailwinds extending into 2021, we look for signs of Shopify being able to sustain growth rates even when the macro environment returns to normal,” Morgan Stanley analyst Keith Weiss said in Oct. 21 research note.