Shopify Stock Is Slipping. Earnings Were Strong, but Investors Are Looking Past Covid
Shopify investors are looking beyond strong earnings to the second half—with a focus on the company’s ability to engineer a soft landing after the company’s huge growth during the pandemic.
Dreamstime
Shopify stock is inching lower on Wednesday after the provider of cloud-based e-commerce software posted better-than-expected results for the June quarter, driven by continued growth in consumer adoption of online shopping. Investors now turn their attention to the second half—with a focus on the company’s ability to engineer a soft landing after the company’s huge growth during the pandemic.
Shopify (ticker: SHOP) reported quarterly revenue of $1.12 billion, up 57% from a year ago, and ahead of the Wall Street analyst consensus forecast of $1.04 billion. Gross merchandise value was $42.2 billion, up 40%. The company said its subscription solutions business segment had revenue of $334.2 million, up 70%, driven by growth in the number of merchants on the platform, while merchant solutions, which includes payment processing, was $785.2 million, up 52%, driven by growth in GMV.
While the growth rate certainly was impressive, Shopify saw a distinct deceleration from the March quarter, when revenue grew 110%, and GMV increased 114%. In the fourth quarter, the company had posted 94% revenue growth and 99% growth in GMV. For all of 2020, the company had 86% growth in revenue, and 96% growth in GMV.
On an adjusted basis, Shopify earned $2.24 a share in the June quarter, well above the Street consensus at 96 cents a share. On a GAAP basis, profits were $879.1 million, or $6.90 a share, including a $778 million unrealized gain on equity investments.
“Shopify fired on all cylinders in our second quarter, keeping our merchants well equipped to seize the opportunities presented in a post-pandemic retail era,” Chief Financial Officer Amy Shapero said in a statement. “As consumer spending remained strong, our merchants thrived and extracted more value from our platform, contributing to our rapid growth.”
Shopify did not provide specific guidance, but repeated a previous forecast for rapid growth in 2021, but at a slower rate than in 2020. Shopify repeated its previous projection that subscription solutions revenue would be driven by more merchants joining the platform, but in lower numbers than the record 2020 level. Shopify also said that it does not expect a repeat of “the surge in GMV” experienced in 2020.
“We continue to expect rapid growth in gross profit dollars in 2021 and plan to continue reinvesting back into our business as aggressively as we can, with the year-over-year growth in operating expenses accelerating in Q3 and again in Q4,” the company added.
Shopify added that “due to the sustained momentum of digital commerce trends in the first half of 2021 combined with the U.S. stimulus distributed in March and April of 2021,” the company generated higher-than-anticipated revenue while incurring lower-than-planned operating expenses as a percent of revenue in the 2021 first half. “As a result, we now expect full-year 2021 adjusted operating income to be above the level we achieved in 2020,” the company said.
Shopify stock on Wednesday is off 2.8% to $1,511.47.
Write to Eric J. Savitz at [email protected]
