Shopify (SHOP) earnings preview: New capabilities to help drive growth in Q4

Shopify Inc. (NYSE: SHOP) is scheduled to report fourth quarter 2019 earnings results on Wednesday, February 12, before the market opens. Analysts expect the company to report earnings of $0.24 per share compared to $0.26 per share reported in the year-ago period. Sales are expected to grow 40% to $482 million.

The company’s topline numbers are expected to benefit from revenue increases in Subscription Solutions and Merchant Solutions, driven in turn by growth in monthly recurring revenue (MRR) and gross merchandise volume (GMV). Last quarter, Subscription Solutions and Merchant Solutions saw double-digit increases in revenue, aided by a 34% increase in MRR and a 48% increase in GMV.   

Shopify is also likely to benefit from the increase in the number of merchants on its platform as well as the addition of new features and capabilities which will improve the customer experience and help boost traffic.

The company’s improvements in its fulfilment network and the expansions of Shopify Payments and Shopify Shipping will help drive growth. It is also worth noting how the acquisition of 6 River Systems has impacted the fourth quarter results.

However, increased investments in the infrastructure and addition of new capabilities are likely to weigh on the bottom line results in the fourth quarter as well. Last quarter, the company reported a loss due to higher expenses.

Also read: Shopify Q3 2019 Earnings Conference Call Transcript

In the third quarter of 2019, Shopify beat revenue estimates, growing 45% year-over-year to $390.6 million. The company missed earnings estimates, delivering a loss of $0.29 per share versus a profit of $0.05 last year. Operating expenses increased 39% during the period.

For the fourth quarter of 2019, Shopify has guided for revenues of $472 million to $482 million and GAAP operating loss of $47 million to $57 million. For fiscal 2019, the company expects revenue to be between $1.545 billion and $1.555 billion. GAAP operating loss is expected to be in the range of $158 million to $168 million.

Shopify’s shares have gained 31% over the past six months and 13% over the past one month.

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