Why Shopify Stock Jumped 20% in August
Image source: Shopify.
What happened
Shares of Shopify (NYSE: SHOP), a provider of a cloud-based commerce platform for small and medium-sized businesses, rose 20.7% in August, according to data provided byS&P Global Market Intelligence. A strong second-quarter report featuring explosive revenue growth was responsible for the stock's gains.
So what
Shopify reported second-quarter revenue of $86.6 million, up 93% year over year and about $6 million higher than the average analyst estimate. Subscription solutions revenue rose 72% to $43.7 million, while merchant solutions revenue jumped 121% to $43 million. This more than doubling of merchant solutions revenue was driven by strong performance from Shopify Payments, which allows its clients to accept credit cards.
Gross merchandise volume sold through Shopify totaled $3.4 billion, up 106% year over year, with over $1 billion of purchases processed through Shopify Payments. Non-GAAP EPS came in at a loss of $0.04, compared to a loss of $0.03 during the prior-year period. Analysts were expecting a loss of $0.08. Shopify expects to produce $361 million to $367 million of revenue for the full year, up 78% from 2015.
Shopify CEO Tobi Lutke pointed to continued merchant adoption of the company's platform:
Now what
Shopify continued to grow at a blistering pace during the second quarter. The company has yet to turn a profit, instead pouring resources into sales, marketing, and R&D. During the second quarter, total operating expenses rose 91%, helping to drive the company's growth. While the stock is expensive, trading for around 10 times the company's guidance for 2016 sales, blockbuster growth could continue for years to come.
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Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook and Shopify. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
