Investors looked past Shopify Inc.’s first revenue miss in at least five years as shares of the e-commerce company surged more than 7% in Thursday trading.
fell considerably short of profit expectations in its most recent quarter and missed slightly on the top line, while its chief financial officer called out a “more normalized spending environment.”
Baird analyst Colin Sebastian noted the rare revenue miss for Shopify but said that investors seem to be focused on the longer-term opportunities ahead. “Clearly a modest miss (or worse) was priced into shares, and consensus expectations should now be better calibrated to moderating growth and higher investment spending,” he wrote in a note to clients.
The company, which had been a big winner in the early days of the pandemic as more consumers flocked to online shopping, posted third-quarter net income of $1.15 billion, or $9.00 a share, up from $191 million, or $1.54 a share, in the year-prior quarter. Net income in the most recent period reflected a $1.34 billion unrealized gain on equity investments.
On an adjusted basis, Shopify earned 81 cents a share, down from $1.13 a share a year earlier and below the FactSet consensus, which called for $1.23 a share.
Shopify noted a $30.1 million impairment charge related to the termination of and other changes to lease agreements given the company’s long-term goals for a remote-work culture.
The company still anticipates “rapid growth” in gross-profit dollars this year and intends to “aggressively” reinvest in the business to chase long-term opportunities, Chief Financial Officer Amy Shapero said on the earnings call.
“As a reminder, we are building a portfolio of growth initiatives with different return time horizons that we expect will contribute to Shopify’s growth over the long term,” she said. “Initiatives like international expansion and Shopify POS, which we embarked upon a few years ago, are further ahead in product and market development, and some of our more complex and groundbreaking initiatives like Shopify Fulfillment Network and Shop are still in their early stages.”
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Shopify’s revenue for the third quarter increased to $1.12 billion from $767 million, while analysts had been looking for $1.15 billion. The company saw $336.2 million in revenue from its subscription solutions and $787.5 million from its merchant solutions.
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The company’s gross merchandise volume (GMV), or the dollar value of orders facilitated through the Shopify platform, rose 35% to $41.8 billion. The company saw growing contributions from offline sales.
“As the share of GMV from offline expanded within our total GMV, it is clear that entrepreneurs are embracing a future in which retail happens everywhere,” President Harley Finkelstein said in a release.
Gross payment volume (GPV), or the amount of GMV processed through the Shopify Payments offering, reached $20.5 billion. That amounted to 49% of the GMV that Shopify processed in the quarter.
Shopify continues to anticipate that its 2021 full-year revenue growth rate will be slower than what was seen in 2020 due to “more normalized” expansion in e-commerce spending, according to the company’s press release.
While Shopify continues to expect that the fourth quarter will be its strongest contributor to full-year revenue, it still forecasts “that the revenue spread will be more evenly distributed across the four quarters than it has been historically,” per the release.
The company also acknowledged that offline and online spending could be impacted by supply constraints as well as increased materials, labor, and shipping costs. In addition, “spending on Black Friday Cyber Monday may be pulled forward” into earlier periods, the company noted in its press release, though Shopify still expects its “GMV in the fourth quarter to continue to grow substantially faster than the commerce market.”
Shares of Shopify have declined 5.0% over the past three months, as the S&P 500
has risen 4.2%.