Canada’s e-commerce juggernaut surges to record

Bloomberg

Shopify shares notched another record after the Canadian e-commerce company reported second-quarter sales that beat analysts’ average estimate and gave a more optimistic full-year outlook.
Revenue grew 48 percent to $362 million, according to a company statement. Analysts were projecting $350.5 million. Shopify raised its 2019 revenue guidance to a range of $1.51 billion to $1.53 billion but kept its outlook for adjusted operating income of $20 million to $30 million unchanged.
“Our strong performance in the second quarter reflects the success of our ongoing activities and investments to help merchants start selling, sell more, and sell globally,” said CFO Amy Shapero.
Shopify, Canada’s biggest technology company by market value, has been a darling among investors who have rewarded the company’s fast-growing sales and recent innovations in online checkout products. The stock has more than doubled this year, outpacing the S&P 500 and the S&P/ TSX Composite Index and has been trading recently near record levels. But the rally has also made it a target for shortsellers, who have shorted nearly 5 percent of the stock.
In addition to helping companies with online sales, Shopify now also offers services that compete with companies like Square Inc at the point-of-sale in brick-and-mortar stores. In the second quarter, Shopify introduced new services such as 3D modeling for product listings and multilingual, multicurrency checkout options, as well as an upgraded point-of-sale system.
Gross merchandise volume, a key metric for e-commerce companies, increased 51 percent to $13.8 billion in the second quarter. Adjusted earnings per share were 14 cents, compared with the average analyst forecast of 3 cents. Shopify has yet to turn a profit on a GAAP basis and isn’t projected to until the end of 2020, according to analyst estimates.
And, while still notching high growth rates in sales, the 48 percent increase in the second quarter was the slowest in Shopify’s four years as a listed company. To counter this slowdown, the company has been focusing on scaling up. In June, Shopify said that it would spend $1 billion to create a network of fulfillment centres in the US, positioning itself as a smaller rival to Amazon’s fulfillment service.
While Shopify has said that it would be able to offset the cost of setting up a logistics network with the additional revenue the service would generate, some analysts are speculating that another share offering may be on the horizon.