- The core platform metrics disappointed. Shopify shares plunged 9% in early trading on Tuesday after gross merchandise volume came in at $119.15 billion, short of the $120.03 billion analysts expected, according to StreetAccount. Subscription gross profit missed by nearly $20 million at $661 million, against estimates of $680.3 million.
- Earnings beat, but revenue did not. Adjusted earnings were 49 cents a share, above the 46 cents LSEG expected, while quarterly revenue of $3.74 billion was just below the $3.75 billion estimate. Subscription revenue of $836 million also missed the $848.1 million FactSet consensus.
- The merchant side held up. Merchant revenue and merchant gross profit both beat estimates, showing that the payments and services business tied to merchant sales kept performing even as subscription numbers fell short.
- The outlook did not add much comfort. Shopify said it expects fourth-quarter revenue growth in the “low thirties” percentage range year over year, compared with LSEG estimates of 32.1%, broadly in line rather than a raise that might have offset the misses.
What Happened?
Shopify reported third-quarter results before the bell on Tuesday. The e-commerce platform posted adjusted earnings of 49 cents a share on revenue of $3.74 billion, with gross merchandise volume of $119.15 billion and subscription revenue of $836 million both below analyst estimates. Merchant revenue and merchant gross profit beat forecasts. The stock fell 9% in early trading.
Why It Matters?
Gross merchandise volume is the clearest read on how much business flows through Shopify’s merchants, so a miss on that line raises questions about the company’s growth engine even when earnings beat. The subscription misses matter as well, because subscription revenue is the steadier, higher-margin part of the model. A fourth-quarter growth outlook only broadly in line with consensus gave investors little reason to look past the shortfalls, at a time when high-multiple growth stocks are being sold on any sign of a slowdown.
What’s Next?
Investors will watch whether the gross merchandise volume shortfall proves to be a one-quarter blip as the holiday shopping season unfolds, since that period drives the fourth-quarter numbers. The company’s ability to deliver revenue growth in the “low thirties” will be the next checkpoint. Any further pressure on subscription metrics would weigh on the case for Shopify’s premium valuation.
Affected Tickers and Coins: SHOP
Source: CNBC
