Shopify

Shopify Q3 2017 EPS $0.05 vs. estimates of $-0.02

NYSE: SHOP, TSE: SHOP
Management Commentary

-“In today’s fast-changing retail environment, merchants large and small are hungry to leverage all that technology can do for them,” stated Russ Jones, Shopify’s CFO.

– CEO Tobias Lutke publicly addressed allegations made earlier this month by high-profile short-seller Andrew Left of Citron Research.

-Tobias Lutke also added, “With another record quarter for merchant adds, along with a record number of store launches on Shopify Plus in the third quarter. On the strength of these results and our underlying business model, we are raising our forecasts for the fourth quarter and full year 2017”.

Financial Highlights

-Revenue of $171.15 million, up 72%, vs. estimates of $166.4 million (Thomson Reuters I/B/E/S).

-Shopify posted it’s first adjusted operating profit since going public, $0.05 per share vs. estimates of a loss of $0.02 per share.

-Subscription revenue  grew to $82.4 million, up from $49.8 million a year ago.

-Merchant solutions revenue grew to $89 million, up from $49.7 million a year ago.

-More can be found on TMX Money.

My Comments

-Shopify continues to execute exceptional revenue growth and beat what are already high expectations.

-Seeing positive operating profit a quarter earlier than projected is a great sign for long-term investors.

-Having management raise guidance further illustrates their confidence in the business and Shopify’s value to their customers.

Key Metrics

-No dividend.

-First quarter of positive adjusted operating profit.

-Revenue growth year-over-year from 2012 to 2016: 111.92%, 108.98%, 95.43%, 89.7%.

Recommendation: Hold

-With the stock doubling year to date, any hickup with the business or a market correction could cause the stock to fall.

-No debt on their balance sheet and impressive revenue growth make it an attractive long-term investment.

-I view Citron Research’s short attack to be unjustified, proving to be a buying opportunity when the stock fell then recovered.

-Much like Facebook’s early stages of being a public company, there were questions on how they would make money, with hindsight that seems foolish, and I believe Shopify will follow the same path.

-From Forbes, Shopify was named the third best tech company to work for, behind SpaceX and Google.

-There is no ratio to value workplace culture, companies that people love to work for will continue to attract talent and be able to succeed and innovate.

Disclosure

I, Jared Flomen, do own shares of Shopify.

Please consult a financial advisor before making investment decisions. This report represents my views, not actionable advice.

Shopify is also a top pick.

 

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