Back to top

Image: Bigstock

Why Is Shopify (SHOP) Up 6.9% Since Last Earnings Report?

Read MoreHide Full Article

A month has gone by since the last earnings report for Shopify (SHOP - Free Report) . Shares have added about 6.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Shopify due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Shopify Q3 Earnings & Revenues Top Estimates, Ups '19 View

Shopify Inc. reported third-quarter 2019 adjusted earnings of 13 cents per share, surpassing the Zacks Consensus Estimate of 11 cents. Moreover, the figure improved from 4 cents reported in the year-ago quarter.

Total revenues surged 45% from the year-ago quarter to $390.6 million, outpacing the Zacks Consensus Estimate of $384 million. The figure also fared better than management’s guided range of $377-$382 million.

The top line benefited from an improving merchant base and rapid expansion in international markets. The company continues to launch a number of merchant-friendly applications to meet the requirements of a dynamic retail environment, in turn bolstering merchant base.

Quarter in Detail

Subscription Solutions revenues (42.4% of total revenues) surged 37% to $165.6 million driven by persistent growth in Monthly Recurring Revenue (MRR) due to the addition of several new merchants.

As of Sep 30, 2019, MRR was $50.7 million, up 34% from the year-ago quarter figure of $37.9 million. Shopify Plus accounted for $13.5 million, representing 27% of MRR compared with 24% in the quarter ended Sep 30, 2018.

Merchant Solutions revenues (57.6%) advanced 50% to $225 million, primarily on account of growth in GMV, which improved 48% from the year-ago quarter to $14.8 billion.

Shopify Capital advanced $141 million cash to merchants in the reported quarter, soaring 85% compared with $76.4 million in the year-ago quarter. Notably, since the launch of Shopify Capital, cumulative merchant cash advances have improved to almost $768.9million, out of which $166 million was outstanding as of Sep 30, 2019.

Shopify Shipping witnessed robust adoption in the third quarter. The offering is being leveraged by approximately 44% of total eligible merchants across the United States and Canada.

Gross Payments Volume (GPV) came in at $6.2 billion, accounting for 42% of GMV processed in the third quarter, up from $4.1 billion (41%) in the prior-year quarter.

Purchases from merchants’ stores especially from mobile devices witnessed 81% of traffic and garnered 71% of orders for the quarter ended Sep 30, 2019, up from 77% and 67% reported in the year-ago quarter, respectively.

Operating Details

Non-GAAP gross profit surged 44.7% year over year to $219.4 million. This can be attributed to “new payment partner pricing terms” and robust performance of Shopify Shipping and Shopify Capital.

Non-GAAP gross margin remained flat from the year-ago quarter to 56%.

Non-GAAP operating expenses surged 35.6% year over year to $200.9 million. Non-GAAP operating expenses as a percentage of revenues contracted 400 bps to 53%.

Shopify reported adjusted operating income of $10.5 million against the year-ago quarter’s loss of $2.4 million.

Balance Sheet & Cash Flow

Shopify ended the reported quarter with cash, cash equivalents and marketable securities balance of $2.667 billion compared with $2.013 billion at the end of previous quarter. The company generated cash from operations of $17.7 million during the nine months ended Sep 30, 2019.

Guidance

For fourth-quarter 2019, Shopify projects revenues in the range of $472-$482 million. The company expects adjusted operating income to be in the range of $10 to $20 million.

For full-year 2019, Shopify raised outlook. Management now projects revenues in the range of $1.545-$1.555 billion better than the previously guided range of $1.51-$1.53 billion. Management now expects adjusted operating income for fiscal 2019 to be in the range of $27-$37 million (previously $20-$30 million).

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -60.48% due to these changes.

VGM Scores

Currently, Shopify has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Shopify has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Shopify Inc. (SHOP) - free report >>

Published in