Shopify stock was sharply higher Wednesday morning after the e-commerce platform turned in a strong quarterly report that helped assuage investor fears about a potential slowdown in revenue growth.
For its second quarter, Shopify posted adjusted earnings of 26 cents a share, beating Wall Street’s call for 20 cents, according to FactSet.
Sales of $2.05 billion jumped 21% year over year, beating consensus of $2.01 billion. A year ago, sales were $1.69 billion. Stripping away the impacts of the sale of Shopify’s logistics business, sales rose by 25%, marking the fifth straight quarter of revenue growth above 25%.
The company notched strong growth across all its business segments, driven by an overall increase in the number of merchants on Shopify’s platform. Revenue for Merchant Solutions, which includes the company’s online payment service, was up 19%. Subscription Solutions gained 27%.
Gross merchandise volume soared by 22% to $67.2 billion, while monthly recurring revenue jumped 25% to $169 million.
“Our Q2 results make it clear: Shopify is rapidly strengthening its position as a leading enabler of global commerce and entrepreneurship,” said Shopify President Harley Finkelstein in a press release.
For its third quarter, the company said it expects revenue to grow at a low- to mid-20s percentage rate on a year-over-year basis. Operating expenses as a percentage of revenue will be between 41% to 42%, down from 45% in the year-ago quarter.
Heading into earnings, Shopify shares had fallen by 30% this year, as investors fretted over whether the company could sustain its double-digit sales growth in the long run. Wednesday’s results—perhaps more importantly, guidance—seemed to provide a resounding yes.
Guidance “checked all the boxes” and had “everything investors were looking for,” wrote J.P. Morgan analyst Reginald Smith, citing a revenue growth rate of over 20% and tempered operating expenses.
The company’s earnings call Wednesday morning helped solidify the market’s enthusiasm.
Management took an upbeat tone in the call, highlighting several initiatives that should help sustain the company’s elevated growth rates. These include expanding in markets outside of North America as well as bringing on bigger, higher-volume merchants onto their e-commerce platform.
Executives also reaffirmed the company’s commitment to keeping things lean, such as investing in technology to make operations more efficient and keeping head count low. Employee onboarding has been “essentially flat” for the past five quarters, said Jeff Hoffmeister, Shopify’s chief financial officer.
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