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Understanding the markets this week: August 2nd, 2021

Shopify makes profits, CEO becomes richest Canadian entrepreneur

Canadian tech darling Shopify has built its lead as Canada’s Most Valuable Company. Shopify reported sales and profits this week that exceeded expectations. Quarterly revenue exceeded $ 1 billion ($ 1.11 billion) and quarterly earnings rose.

According to the Shopify press release, net income for the second quarter of 2021 was $ 879.1 million, or $ 6.90 per diluted share, compared to net income of $ 36.0 million, or $ 0.29 per diluted share for the second quarter of 2020. Net income for the second quarter of 2021 includes net unrealized income of $ 778 million on our investments. Shopify earned $ 2.24 per share on an adjusted basis for the quarter ended June 30, including income from equity investments, up 113% year over year.

Shopify sets up small business ecommerce websites and enables digital payments and shipping as well. When it comes to e-commerce services, the company is number two in North America, behind the giant Amazon. It is estimated that approximately 10% of all ecommerce traffic in the US goes through stores hosted by Shopify, second only to 39% from Amazon.com Inc.

On my website, I’ve provided an example of how Shopify enabled a Canadian craft brewer to not only navigate and pan in the early days of the pandemic; The Etobicoke, Ontario company has actually grown sales and profits thanks to Shopify.

The company now has the largest weighting on the Toronto Stock Exchange – it is the most valuable company in Canada after outperforming the Royal Bank of Canada for that title. Given its incredible success, this stock can certainly power market indices.

If you take a dividend approach, you are missing out on this incredible growth story. Readers will know that I’m a huge fan of the hefty dividend propensity of Canadian stocks. But we could also include the growth driver of the emerging Canadian tech sector, which has many incredible success stories (though Shopify almost dominates this index ETF).

It was reported that CEO Tobias Lütke is now the richest Canadian. According to Globe and Mail (Paywall) …

“Mr. Lutke’s stake in the e-commerce software company now stands at $ 13.3 billion, or $ 16.7 billion in Canadian dollars. In addition, records of stock sales indicate that Mr. Lutke has been through the since early 2020 Sale of Shopify stock generated gross proceeds of $ 490 million.

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