Shopify shares fell on Tuesday after the company missed revenue expectations for the September quarter, even as it beat on profit. Growth in gross merchandise volume also slowed from the prior quarter.
Shopify shares fell 8.7% on Tuesday as investors panned a mixed earnings report. The company, which provides tools for businesses to run online stores, topped profit estimates but fell just short on sales.
Profit beats, revenue falls short
Shopify reported adjusted earnings per share of 49 cents, up from 34 cents a year before, ahead of the 47-cent FactSet consensus.
Revenue, however, came in at $3.74 billion, below the $3.77 billion analysts were modeling. Gross merchandise volume, the dollar value of purchases made through Shopify's platform, rose 29.5% to $119.1 billion, but growth slowed from 31.6% in the June quarter.
According to Seaport Research analyst Jeff Cantwell, writing in a client note: "The market’s not going to like this one."
Valuation leaves little room
The stock trades at about 65 times estimates for forward earnings, while the S&P 500 trades at about 18 times, according to Dow Jones Market Data. Investors therefore pay far more for each dollar Shopify earns than for the index as a whole. Cantwell said Shopify is in a tricky place for now given that relatively high valuation multiple.
December-quarter outlook
For the December quarter, Shopify expects revenue to grow at a low-30s percentage rate. Analysts had been modeling 31% growth.
Cantwell wrote that the guidance generally looks positive at first glance, because Shopify typically does well in the holiday quarter. But the slight Q3 revenue miss, he said, opens the door for investors to question that guide and whether there is any potential upside.
Shopify's executives cheered the numbers. CFO Jeff Hoffmeister said delivering these results at its scale speaks to the strength of the company's model.
Source: MarketWatch
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