Shopify Inc. (SHOP) is set to report third quarter 2018 earnings results on Thursday, October 25. Analysts expect the company to report a loss of $0.02 per share on revenues of $257 million. The company has consistently topped expectations over the past four quarters and can be expected to stay on track to beat them this time too.
For the third quarter, Shopify provided an outlook for revenues of $253 million to $257 million and for the full year of 2018, the company’s revenue guidance is in the range of $1.01 billion to $1.02 billion.
In the second quarter of 2018, the company’s revenues grew 62% year-over-year to $245 million while adjusted EPS stood at $0.02. Reported net loss was $24 million or $0.23 per share. Subscription Solutions revenue grew 55%, driven by growth in monthly recurring revenue (MRR).
Consistent recurring revenue increases in the subscription segment can be an indicator of underlying strength. The recurring revenue growth is expected to continue in the third quarter as well which can be taken as a positive sign.
Shopify’s slowing sales growth, continued losses and high costs remain a concern. The company is investing significantly in expanding into new markets. Shopify is also looking at opening brick-and-mortar stores and opened its first one in Los Angeles last week. Depending on the performance of this store, we can expect to see some initiatives going forward.
Looking ahead, Shopify is expected to benefit from the growth in ecommerce. The stock gained 27% thus far this year but looking at the past three months, the stock has dropped 24%. The slowdown in sales growth has impacted shares negatively. If the company tops expectations for the third quarter, the stock is expected to see a pickup.
The whole auto industry is going through an evolutionary period with high volatility and uncertainty, which is visible in all major stocks including Ford (F), General Motors (GM), Fiat Chrysler Automobiles (FACU) and Toyota Motors (TM). As Ford reports third-quarter earnings after market close on October 24, it will not only set the yardstick for the rest of the auto industry earnings this quarter but will also provide a glimpse of where the sector is headed.
The company has already dropped hints that it may see another revenue decline for the recently ended quarter, as it reported an 11% dip in September US auto sales. While SUVs and pickups continue to drive sales for Ford, demand and sale of sedans have been pretty sluggish recently.
The same goes for Ford rivals also. US sales of General Motors slipped 11% in Q3, while that of Toyota fell 6%. However, Fiat managed to buck this trend by posting a 10% increase in sales in the third quarter.
Meanwhile, profits have not been dented much, as average transaction price per vehicle increased to $1,500. The automakers’ decision to cut a good portion of its workforce should also ensure enough liquidity within the stock.
Investors are waiting to see how CEO Jim Hackett is planning to restructure the company and would be keenly listening for any hints on the same. The impact of the US-China trade war on the production and distribution of goods into the Asian market is also likely to be discussed during the Q3 earnings conference call.
Ford shares have shed 32% of its value during the year-to-date period.
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