Markets realized they mispriced Shopify (SHOP) after the firm posted strong second-quarter results. The e-commerce platform’s gross merchandise volume impressed shareholders.
In the last quarter, Shopify posted revenue growing by 21.3% Y/Y to $2.05 billion. GMV increased by 22% to $67.2 billion, $2 billion above analyst estimates. Monthly recurring revenue is healthy, rising by 25% Y/Y to $169 million.
Shopify has an attractive offering. It brought more merchants on board across a wide range of markets. It used paid trials and marketing to drive the increase in customer growth. In addition, Shopify has advanced data-driven analytical tools that will help it find new customers in new areas.
Dismissed as a fad, Reddit (RDDT) is proving its worth. The company reported revenue of $281.2 million, up by 53.6% Y/Y. Though it lost six cents a share in Q2, it increased its user and income guidance for the third quarter. In addition, Reddit’s gross margins increased by 5% to 89.5%.
Reddit’s stock-based compensation is a headwind. Until its cash flow increases, the social networking firm will need to rely on this payment system. This will pressure RDDT stock in the near term.
Your Takeaway
Shopify and Reddit have vastly different growth drivers. Add both stocks to the watch list.
