Cloud Stocks: Analysis of Shopify’s Deliverr Acquisition

Ontario-based Shopify (NYSE: SHOP) recently announced its quarterly results that continued to surpass market expectations. The company recently announced the acquisition of a logistics company as it continues to build its fulfillment network to compete with Amazon.

Shopify’s Financials

Shopify’s first quarter revenues grew 22% to $1.2 billion, falling behind the market’s forecast of $1.25 billion. Net income was $1.5 billion, compared with a net loss of $1.3 billion a year ago. Non GAAP earnings fell to $0.20 per share, missing the market’s forecast of $0.80.

By segment, subscription revenues grew 8% to $344.8 million. Merchant solutions revenue rose 136.54% to $858.9 million.

Among other metrics, gross merchandise volume (GMV) rose 16% to $43.2 billion in the quarter. Gross Payments Volume (GPV) grew 27% over the year to $22 billion.

Shopify did not provide a forecast for the quarter.

Shopify’s Deliverr Acquisition

Recently, Shopify announced the acquisition of San Francisco-based, fulfillment technology services provider, Deliverr for an estimated $2.1 billion. The acquisition will help Shopify provide simplicity and scale to millions of merchants by addressing the complexities of fragmented supply chain management.

Founded in 2017, Deliverr’s logistics network delivers over a million orders per month for thousands of merchants across the U.S. Its network management software, team of software engineers, operations experts, and customer champions with deep domain expertise, and asset-lite network of warehouse carrier and last mile partners will provide Shopify with the ability to become a robust end-to-end logistics platform. Deliverr’s asset-light infrastructure both complements and extends the reach of Shopify’s network of large-capacity, self-operated hubs, in addition to enhancing affordable access to a two-day delivery promise in the U.S. across all channels.

Shopify will have the ability to streamline logistics to provide simplicity and scale advantages for merchants by integrating the end-to-end software and logistics platform into its ecosystem. It will be able to strengthen its ability to offer merchants simplified inventory management, demand-driven inventory balancing, and fast delivery with minimal inventory required.

Prior to the acquisition, Deliverr had raised $490.9 million in seven rounds of funding led by Activant Capital, GLP, 8VC, Alumni Ventures, Tiger Global Management, Brookfield Growth, and Coatue. Its most recent round was held in November 2021 where it raised $250 million.

Shopify’s 6 River Systems already powers embedded technologies for warehouses. With the addition of Deliverr, Shopify will collectively form a broader logistics unit within Shopify, and compete even more aggressively with Amazon.

Its stock is trading at $363.85 with a market capitalization of $45.9 billion. It had touched a 52-week high of $1,762.92 in November last year and a 52-week low of $308.06 earlier this month.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.

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This segment is a part in the series : Cloud Stocks