Shopify Stock Up In Pre-Market Trading As Earnings Blow Past Estimates

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Shopify stock jumped nearly 3% in pre-market trading today after Wall Street announced earnings that easily beat estimates.

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The Ottawa-based provider of e-commerce services for retailers reported earnings of $133.2 million, or $1.13 per share, for the third quarter after a loss of $ 33.6 million, or 29 cents per share, in the same period last year. Analysts tracking the company were expecting earnings per share of 52 cents.

There was a lot of good feeling about the company’s business, partly driven by plummeting brick-and-mortar retail as health regulations to limit the proliferation of novel coronaviruses such as a lack of constipation that slowed foot traffic.

Shopify’s revenue of $767.4 million in the quarter was up 96% from a year earlier and beat the expectations of analysts who were predicting to bring in about $658 million for the company. Operating income was also up a year earlier, with Shopify calling for $50 million, or 7% of revenue, while a loss of about $36 million in the year-ago period. Adjusted operating income was approximately $131 million.

“The accelerated shift to digital commerce triggered by COVID-19 is continuing, as more consumers shop online and entrepreneurs step up to meet demand,” Shopify’s President, Harley Finkelstein said in a statement. “Entrepreneurs will be the force in rebuilding economies all over the world, which makes it even more important for Shopify to innovate and build the critical tools that merchants need to succeed in a low-touch retail environment.”

“Shopify’s tremendous third-quarter results reflect our merchants’ resilience and entrepreneurial spirit,” said Amy Shapero, CFO of Shopify. “More entrepreneurs are signing on to Shopify to quickly and easily put their ideas into action. We continue to develop our global commerce operating system, making it easy for merchants to get online and start selling, searchable, and buyers can find their goods while offering a delightful shopping experience”.

Shopify is interesting not only for its own revenue, but what its revenues say about the health of direct-to-consumer retail businesses — some of which have raised significant investment from venture capitalists.

Given the company’s merchant solutions revenue, which grew 132% to $522.1 million – the bottom line position of these direct-to-consumer companies should be fairly healthy. Gross merchandise volume, the figure from which Shopify derives its merchant solutions gains, was $30 billion. This figure is an increase of $16.1 billion from the year-ago period.

Shopify is sitting on a pretty hefty financial cushion with $6.12 billion in cash and equivalents, up from $2.46 billion at the start of the year.

Outside its finances, Shopify is taking steps to expand its footprint in social commerce, through a partnership with Tiktok. The two companies said the deal should enable more sales sellers to reach Tikitok’s audience, marketing directly to the platform using a toolkit integrated with Shopkeep’s dashboard.

“More entrepreneurs are signing on to Shopify so they can quickly and easily put their ideas into action,” said Amy Shapero, Shopify’s chief financial officer. “We continue to evolve our global commerce operating system to make it easier for merchants to get online and start selling, get discovered, and get their goods to buyers, while providing a delightful shopping experience.”

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