Shopify shares fall despite revenue increase

Heather McIlvaine

1st Aug 2018

Canada-based e-commerce platform Shopify reported a 62 per cent year-on-year revenue increase in Q2 to US$245 million, off the back of a 54.6 per cent increase in subscription revenue from its paid platform targeted at large enterprises, Shopify Plus.

Despite this growth, shares in the company listed on the New York Stock Exchange were down about 6 per cent at close of trading, due to a slowdown in the pace of its growth compared to the previous year.

Shopify’s gross merchandise volume (GMV) reached US$9.1 billion in Q2, a 56 per cent increase over the same period last year, compared to the 74 per cent year-on-year increase it reported in 2017.

GMV refers to the amount of sales made by merchants on the platform. Shopify earns money by taking a cut of GMV in addition to charging a subscription fee and offering payment and shipping solutions.

Growth in monthly recurring revenue, which is driven in part by subscription fees, also declined from 64 per cent growth a year ago to 49 per cent year-on-year growth in Q2. The share of subscription revenue from the higher-margin Shopify Plus, however, increased from 18 per cent to 23 per cent.

D.A. Davidson & Co analyst Thomas Forte told Reuters that the company’s ability to re-accelerate growth depends on Shopify Plus and international expansion.

Reuters reported that the company’s investment in research and marketing drove a 63.2 percent rise in expenses to US$167.7 million, widening net losses to US$24 million from US$14 million for the same period last year.

Shopify currently expects to bring in revenues between US$253 million to US$257 million in Q3, reporting a GAAP operating loss in the range of US$40 million to US$42 million.

It anticipates 2018 full-year revenues to be in the range of US$1.015 billion to US$1.025 billion, with a GAAP operating loss in the range of US$105 million to US$110 million.