Shopify shares soared by more than 25 percent on Tuesday. It was their best day of trading in the past year, after Shopify reported an impressive increase in revenue for its third quarter.
Shopify reported revenue of 2,16 billion dollars, an increase of 26% over the previous year, and surpassing FactSet’s consensus of $2.1 billion.
Shopify has grown its revenue by more than 25% for the sixth quarter running, even excluding sales of the logistics division.
Gross merchandise value (GMV), which is the company’s total sales value, also increased by 24%.
Investors are optimistic about Shopify’s earnings
Shopify’s GAAP earnings, which were 64 cents a share in 2018, significantly outperformed the market’s 19-cent estimate. This was due to efficient cost management as well as strategic growth.
Shopify is expecting to maintain its momentum in the fourth quarter. It projects revenue growth between mid-20s and high-twenties.
Shopify’s President Harley Finkelstein said to Barron’s that “Entrepreneurship is expanding and so are global markets. Shopify has a huge market share in both of these areas.”
Finkelstein attributes the increase in revenue to newer segments on Shopify’s platform that include point-of-sale, B2B, and enterprise solutions.
Finkelstein said, “These new Shopify on-ramps are something we haven’t had in the past and they allow us to be well positioned for our continued growth.”
Analysts maintain positive outlook on Shopify Stock
Shopify stock has been rated positively by analysts, who cite sustainable GMV growth as the main driver.
Bhavin Bhavin, an analyst with Deutsche Bank reiterated its “Buy rating” on Shopify. He noted that the company’s focus on B2B and enterprise offerings may expand its market.
Shopify shares are up 44% from its earnings for the second quarter in August. The S&P 500 only saw a modest 9% gain in that time period.
Marketing discipline boosts profits
Analysts are confident about Shopify’s future profitability, despite the recent drop in its profits due to a rise in marketing costs.
Citi analyst Tyler Radke stated that while Shopify will continue to spend on marketing until 2025, this cost could be offset if core costs are reduced.
Finkelstein emphasized this disciplined approach on Tuesday. He described the marketing efforts of his company as “very science-based” and stressed that money would be spent only where there are meaningful opportunities.
Shopify’s strong revenues and focus on sustainable growth position it well to take advantage of its growing market share, boosting investor confidence in the future.
The post Shopify Stock Jumps 25% To Hit A Year High–Here’s What Driven the Surge may be updated as new developments unfold.
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