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August 1, 2019 11:45 AM, EDT

Shopify Rally Continues After Sales, Outlook Beat Estimates

Shopify Cole Burston/Bloomberg News

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Shopify Inc. shares continued their rally Aug. 1 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% to $362 million, according to a company statement Aug. 1. 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. The stock jumped as much as 8.8% in early trading in New York.

“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,” Chief Financial Officer Amy Shapero said.

Shopify

Shopify CEO Harley Finkelstein (Christinne Muschi/Bloomberg News)

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 recently has been trading near record levels. But the rally has also made it a target for shortsellers, who have shorted nearly 5% of the stock.

Besides helping companies with online sales, Shopify now 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% 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.

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And, while still notching high growth rates in sales, the 48% 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 centers in the United States, positioning itself as a smaller rival to Amazon.com’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.