Shopify will acquire 6 River Systems for $450 million…
Shopify announced late Monday that it agreed to purchase 6 River Systems in a deal worth $450 million. The deal consists of about 60% in cash and 40% in Shopify Class A shares.
6 River Systems is a leader in warehouse fulfillment solutions. It’s best known for its collaborative mobile robots dubbed “Chuck,” which can assist in warehouse operations.
“Shopify is taking on fulfillment the same way we’ve approached other commerce challenges, by bringing together the best technology to help everyone compete,” Shopify CEO Tobi Lütke said in the press release. “With 6 River Systems, we will bring technology and operational efficiencies to companies of all sizes around the world.”
Shopify said the transaction, which is expected to close in the fourth quarter of 2019, won’t have a material impact on the company’s 2019 revenue. It’s also expected to add about $25 million to Shopify’s 2019 expenses.
This deal can mean accelerated growth for the Shopify Fulfillment Network, which is designed to “ensure timely deliveries, lower shipping costs, and provide superb customer experience for merchants and their customers.”
Co-CEO and co-founder of 6 River Systems Jerome Dubois stated, “we will help thousands of businesses improve their fulfillment operations, with an easy-to-learn solution that can more than double productivity and improve accuracy.”
Overall, this is a sensible move for Shopify, but the news didn’t make much of an impact on the company’s stock. Shopify shares dropped by 0.2% in after-hours trading on Monday.
Sustained Growth
Shopify stock has performed incredibly well over the past year. In the last 12 months, the company’s shares increased by more than 150%. While revenue growth has slowed, Shopify has continued to increase in value.
If this acquisition can help improve the Shopify Fulfillment Network’sperformance, it could help push Shopify to even greater heights.
Catching up to the Competition
Shopify’s recent growth pushed the company’s value to $40 billion. That nudges Shopify ahead of eBay, one of its major competitors in the e-commerce space. eBay’s value is about $34 billion.
R.W. Baird raised Shopify’s price target to $410 and expects Shopify to become the second-largest e-commerce platform in the U.S. That’s in terms of total sales volume from sellers using the service. The number of sellers using Shopify is also expected to pass one million by the end of the year.
Recent Earnings Boost Optimism
Shopify’s performance over the past year has been great, and it shows in the company’s Q2 earnings report.
Highlights from this report, released early August, include:
- $362 million in revenue, a 48% increase from the same quarter last year.
- $153.0 million in revenue from Subscription Solutions.
- Quarterly earnings of 14 cents per share.
“Our strong performance in the second quarter reflects the success of our ongoing activities and investments to help merchants start selling, sell more, and sell globally,” Shopify CFO Amy Shapero said in the report. “The appeal of entrepreneurship is universal, which is why more entrepreneurs everywhere are attracted to Shopify. Our powerful yet easy-to-use retail operating system helps level the playing field, providing expansive opportunities for our merchants and Shopify around the world.”
For the full year 2019, Shopify expects $1.51 billion to $1.53 billion in revenue.
