OTTAWA — Shopify Inc. overtook RBC as the most valuable Canadian company Wednesday after the company’s share price climbed on signs demand for online commerce is higher than ever.
The stock price of the Ottawa-based online merchant platform was up $67.17 or 6.94 per cent to $1,034.42 Wednesday as its results beat analyst expectations, vaunting its market capitalization to $121.26 billion — and ahead of RBC’s $120.5 billion.
Shopify shares have more than doubled in price since mid-March, as brick and mortar retailers that were forced to close amid the COVID-19 pandemic sought online alternatives.
Shopify said new store creation jumped by 62 per cent between March 13 and April 24 compared with the six weeks prior, thanks in part to its offer of free 90-day trials of basic accounts for new merchants.
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Demand has forced Shopify to reorient its priorities and standards as it rolls out new features and shelves previous plans.
“I have intentionally asked the company very early in this crisis to delete all of our existing plans and re-derive them from this new reality,” said CEO Tobi Lutke on a conference call Wednesday.
The company has rolled out newer options such as curbside pickup, while also suspending its brand campaign and shifting its marketing team towards producing online tutorials such as how merchants could start selling gift cards and where they can access government assistance programs.
To meet the heightened demand, the company has had to lower its standards to make sure orders keep moving, said Lutke.
“I’ve asked the company to lower its minimum accepted quality bar to shipping because something has to become variable because there’s only 24 hours in the day.”
The company said it also rushed out its Shop app, which both allows order tracking and local store discovery, as part of the push for more services during such a demanding time.
Increased subscriptions and sales in the quarter helped push revenue up by 47 per cent compared with last year, though economic uncertainty on COVID-19 also led to an increase in cancellations and downgrades to lower-priced subscriptions. Monthly recurring revenue was also hit by Shopify’s removal of thousands of stores that violated its acceptable use policy, and lighter international merchant ads.
The company reported a net loss in the first quarter of US$31.4 million in part because of expenses related to a takeover of 6 River Systems, significantly more brand spending, and more allowance for losses from its lending arm, which has lent out over US$1 billion, as it anticipates the impacts of COVID-19.
On an adjusted basis, Shopify says it earned US$22.3 million or 19 cents per share for the first quarter of 2020 compared with an adjusted profit of US$7.1 million or six cents per share for the first quarter of 2019.
Analysts on average had expected an adjusted loss of 18 cents per share for the quarter and US$442.9 million in revenue, according to financial markets data firm Refinitiv.
This report by The Canadian Press was first published May 6, 2020