Shopify (SHOP 138.42, -9.66, -6.52%) hit a near three-month low this morning
despite reporting strong fourth quarter results.
The headline numbers don't look all that bad, but there wasn't much margin for error given the mid-teens sales multiple.
Shopify reported a surprise adjusted net profit of $0.02/share. The adjusted operating loss and revenue came in above guidance.
Revenue grew 62% to $245 mln vs. $230-235 mln guidance. That does represent the slowest top-line growth since the company came public.
Subscription Solutions revenue grew 55% to $110.7 mln, driven primarily by 49% growth in Monthly Recurring Revenue and the increase in the number of merchants joining the Shopify platform. Merchant Solutions revenue grew 68% to $134.2 mln, driven primarily by the 56% growth of Gross Merchandise Volume (GMV), as well as by strong growth in Shopify Capital and Shopify Shipping, each of which more than doubled revenue over last year's second quarter.
What failed to impress? Monthly Recurring Revenue (MRR) growth slowed to 49% from 56% in the first quarter. Shopify also missed gross margin estimates. Management said the company's move to the cloud impacted subscriber gross margin, which will recover in the fourth quarter.
Perhaps the largest blemish came from the largely in-line third quarter revenue guidance. The company had impressively guided following quarter revenue above consensus in its first twelve quarterly reports since the IPO in 2015. Shopify also raised its 2018 revenue outlook slightly, in-line with consensus.
The company also filed a new registration statement but noted that it has no plans to do an offering.
All things considered, Shopify stock was vulnerable heading into the print.
Another solid beat and raise was needed to justify the frothy ~14x fiscal 2018 sales multiple. Shopify is a primary example of what has been out of favor in recent sessions as a rotation into value has wreaked havoc on many leading software stocks.
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