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Shopify stock rallies after Q3 earnings beat

E-commerce solutions platform Shopify (SHOP) reported better than expected earnings and revenues for the third quarter aided by robust subscription growth. The company’s stock gained about 5% in Thursday’s premarket trading following the earnings report.

Shopify Q3 2018 earnings infographic
Shopify Inc. Q3 2018 earnings infographic

On an adjusted basis, Shopify posted earnings of $0.04 per share, slightly lower than last year’s $0.05 per share. On a reported basis, the company recorded a net loss of $23.2 million or $0.22 per share, compared to a loss of $9.4 million or $0.09 per share in the prior-year period. Operating loss widened more than expected to $31.4 million, hit by cost escalation.

Total revenue surged 58% annually to $270.1 million in the third quarter, helped by double-digit growth in the subscription solutions and merchant solutions revenues. Monthly recurring revenue was up 41% compared to last year, while gross merchandise volume jumped 55% to $10 billion. Quarterly results topped Wall Street estimates consistently in the past four quarters.

Total revenue surged 58%, helped by double-digit growth in subscription solutions and merchant solutions

“We relentlessly shipped new products and features to prepare our merchants for their biggest selling season of the year, merchants’ GMV expansion was well ahead of e-commerce growth overall, and our merchant base continues to expand at a healthy clip,” said CFO Amy Shapero.

The management currently expects revenues in the range of $1.045 billion to $1.055 billion for fiscal 2018 and an operating loss between $95 million and $97 million. The company is looking for operating earnings in the range of $8 million to $10 million, on an adjusted basis.

Shopify swings to a surprise profit in Q2 on strong revenues

The forecast for the fourth quarter is an operating loss between $15 million and $17 million on revenues of $315-$325 million. Adjusted operating profit is forecast in the range of $16 million to $18 million.

The continuing stress on the company’s profitability from higher costs deepened in recent months after it forayed into brick and mortar business and took up an expansion program that requires heavy investment.

Shopify’s shares gained about 5% in premarket trading Thursday following the earnings report, after closing the previous trading session sharply lower.

 

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