Shopify Stock Prices by alexmazur005 on TradingView.com
Source: TradingView
Shopify, Ottawa’s start-up surprise, hasn’t seen profits for several years, and lost over $4-million in their last quarter, according to their most recent financial statement.
Even though these numbers might be troubling for some shareholders, Nour El-Kadri, professor of Strategic Management at the Univeristy of Ottawa’s Telfer School of Management, believes that Shopify’s losses might be hints of its “big future” and an “ambitious agenda”.
Although its revenue shot up by almost 70 per cent in the last quarter, the company’s general and administrative costs – that is office space, computers, tech architecture and salaries – has more than doubled in its last quarter.
Basically, Shopify is spending more than it’s earning.
“They’re not doing this out of nowhere, they’re doing it with the idea of improved productivity,” says El-Kadri. He mentioned that Shopify’s habit to invest in its employees by providing creative workspaces, catered lunches, and other perks as a tactic of instilling “a family environment.” This sense of staff inclusivity has proven to work for other companies in the past such as Google and Facebook.
Shopify first started off as a snowboard selling company in 2004, based out of downtown Ottawa, but in 2006 Shopify began offering its easy to use online stores to service small to medium sized companies. The company has grown, with more than 200,000 online stores, and raised more than 100 million dollars when it opened its stocks to the public in May 2015.
Since it became public, Shopify’s stock prices have plummeted, but mainly because so many people are buying Shopify’s stocks. In 2015, its number of shares has almost doubled from the previous year, making Shopify a hot commodity in the ecommerce world.
James Bowen, another professor in the Telfer School of Management, and an expert on growth of start-up companies, jumped on the Shopify bandwagon and bought shares last year. Bowen says that the company is thinking, well, like a start up, and taking measured risks for future growth.
“If you want creative and innovative thinking that attracts good people, you need to create a corporate culture and environment,” says Bowen. Old and bureaucratic ways only hinder a company like Shopify that works in the fast paced environment of the exponentially growing industry of online businesses. According to Bowen, for Shopify to continue owning this market, it will have to keep up an environment where its people “can let their brains go at full speed”.
The company has also focused less of their attention on research and development, which for a high tech company might seem counter-intuitive. According to Bowen, Shopify’s base platform is already the best in the business, and therefore it’s more important for it to focus on monopolizing their market by improving existing features, instead of trying to reinvent Shopify’s well working wheel.
“Expansion beyond the norm” is what El-Kadri sees in Shopify’s aspirations. It seems as if they’re following through by partnering up with the some of the biggest names on the web.
In a press release following their last financial statement, Shopify stated that they were now partnered up with companies like Amazon, Facebook, and Twitter, who according to their new CEO Tobi Lütke, will “contribute to our long-term growth.”
El-Kadri did mention one minor area of concern.
“It looks like they’re not paying much attention or doing due diligence into their expenses,” said the business professor, who likened these habits to companies who flourished in the high tech boom.
“It’s only when they’re hit that they will start to look into those expenses and they will be cutting them down,” added El-Kadri.
Does he see that hit coming anytime soon?
“No,” said El-Kadir. “Shopify is on sound ground.”