Shopify (SHOP TSX) Shopify offers e-commerce enablement services primarily to small/mid-size enterprises via a recurring subscription model and ancillary merchant solutions such as payments, working capital financing, inventory management, etc. E-commerce continues to benefit from long-term secular tailwinds, but in the near term, Shopify should also continue to benefit from robust earnings momentum with the divestiture last year of its fulfillment business, which was a strategic mistake and a big drag on profitability. Some fairly recent new arrivals in its C-suite and boardroom have helped to refocus Shopify’s strategy on profitability and growth. Consensus estimates forecast an 48 per cent improvement in profit this year and a further 35 per cent next year in light of its meaningful workforce reduction and the elimination of the large fulfillment centers, coupled with a recent 33 per cent increase in its monthly subscription price, which has been well accepted by merchants – a strong endorsement of how differentiated, “sticky” and mission-critical its offering is to e-tailers.
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