Shopify raises forecast for 2020 after nearly 50% jump in revenue
The stock has risen more than 70% from November
New York — Shopify reported fourth-quarter revenue on Wednesday that topped analysts’ estimates and gave an optimistic forecast for 2020, boosted by holiday shopping and add-on services such as payment and marketing tools.
The shares surged the most in almost four years. Sales grew by 47% to $505.2m in the quarter, Ottawa-based Shopify said in a statement. Analysts expected $481.6m, according to data compiled by Bloomberg.
For 2020, Shopify said it sees revenue of $2.13bn to $2.16bn, compared with analysts’ projection for $2.12bn. The key metric of gross merchandise volume, which represents the value of all goods sold on the platform, increased 47% from a year earlier.
Over the Black Friday/Cyber Monday holiday weekend, merchants on Shopify’s platform, which now number more than 1-million, made more than $2.9bn in sales, up from $1.8bn a year earlier, according to the company.
The New York-listed shares jumped as much as 15.5% at 9.30am Wednesday, to a record of $569.10.
The stock has risen more than 70% from November, boosted by the pace of revenue growth and amid optimism for a fulfilment centre plan announced in 2019.
Shopify said in June that it will invest $1bn in facilities over five years to help merchants on its platform deliver products quickly and easily, following a path blazed by Amazon.com.
A few months later, Shopify made its biggest acquisition yet, paying $450m for 6 River Systems, a warehouse robotics company.
Shopify helps businesses open their own digital stores across multiple channels, including social media, through its platform. The company also provides point-of-sale services in brick-and-mortar stores, competing with Square.
The company also swung to a profit in the fourth quarter, reporting $771m, compared with a loss of $1.5bn a year earlier. Profit excluding some costs was 43c a share in the quarter, beating analysts’ projection for 24c.
“Shopify’s fourth quarter 2019 performance was impressive in our view,” said Anthony Chukumba, an analyst at Loop Capital Markets, in a note following the results. “We were particularly encouraged by the gross merchandise volume (GMV) growth, which further demonstrates how Shopify is ‘democratising commerce’ and providing value to its merchants.”
Besides fulfilment centres, the company has rolled out tools such as chat and e-mail, as well as video and 3D modelling for products to help merchants improve marketing and build direct relationships with buyers. Such investments combined with the company’s push to capture international markets could prevent any significant margin expansion in 2020, said Anurag Rana, a senior analyst with Bloomberg Intelligence, in a February 5 note.
CFO Amy Shapero acknowledged on an earnings call that 2020 is “clearly a year of heavy investment” for Shopify, but the company expects to see strong growth from the resulting increase in clients and gross merchandise volume, she said.
Shopify said it expects an operating loss in the range of $324m to $344m in 2020. While it mainly caters to small and medium-sized businesses, Shopify also counts high-profile brands such as Gatorade, Aerosoles, Victoria Beckham Beauty, Heineken, and SpaceX.
Shopify Plus, a segment geared towards companies with high sales volumes, has been key to attracting such larger brands. Shopify Plus contributed 27% of the company’s overall monthly recurring revenue, compared with 25.4% in the same quarter in 2019.