The stock is also responding to Shopify's improving profitability on the bottom line

CatherineGunter
2023-11-03

$Shopify(SHOP)$

Third-quarter revenue of $1.7 billion was marginally higher than analysts' estimates and represented an increase of 25% over the year-ago quarter. The top-line beat affirms the momentum Shopify has been building in recent quarters, which has 70% year to date.

More businesses are signing up for subscriptions and driving steady growth in the company's merchant solutions business. But the stock is also responding to Shopify's improving profitability on the bottom line.

Operating income came in at 7% of revenue, or $122 million, reversing last year's operating loss of $346 million. The company's decision to sell its logistics operation to free up resources and lower expenses is clearly paying off, and shareholders are being rewarded.

Management expects the momentum to continue with the holiday shopping season coming up. For the fourth quarter, revenue is expected to be in the low-to-mid-twenties year over year excluding the impact of sales in the logistics business from the fourth quarter of 2022.

Moreover, free cash flow margin relative to revenue was a healthy 16% in the third quarter, and management expects it to remain in the high-teens range in Q4.

Here's an opportunity to watch
For a stock trading at a high price-to-sales ratio of 12, Shopify hit all the right notes in its latest update. The company should continue to see healthy margins and growing free cash flow over the long term, which could push the stock to new highs.

As we enter 2024, investors will want to watch Shopify's payments business following its Buy With Prime integration with Amazon. This should benefit Shopify merchants and lead to higher checkout conversion, which could boost the company's revenue.

SHOP Jumps 22%: Buy or Sell at High?
Shopify closed up 22.3% on after the Canadian e-commerce company reported third-quarter results that beat expectations, and gave a strong forecast for the remainder of the year. - GMV was over $56 billion up 22% - Revenue hit $1.7 billion and was up 25% - Free Cash Flow was over $270 million ---------------------- Will you buy SHOP after its 20% jump? Are you bullish on SHOP or not? How about its competition with other e-commerce companies? What's your target price for SHOP?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

Leave a comment
1
2