Shopify Q3 Revenue and Profit Miss Estimates

Shopify (SHOP) revenues and profits rose in the third quarter of 2021, but they didn’t beat analysts’ estimates.

Shopify’s revenue came in at $1.1 billion for the quarter ended September 30, an increase of 46% from $767.4 million in the prior-year quarter.

Net income was $1.15 billion ($9.00 per share) in Q3 2021, an improvement from a net income of $191.1 million ($1.54 per share) in Q3 2020. Profit was boosted by an unrealized capital gain on the company’s investments. On an adjusted basis, Shopify earned $0.81 per share, down from $1.13 in the prior-year period.

According to Zacks Consensus Estimate, Shopify was expected to post adjusted EPS of $1.28 on revenue of $1.15 billion.

Shopify generated $336.2 million in Subscription Solutions revenue, up 37% year-over-year, with the growth primarily driven by more merchants joining the platform. In addition, Merchant Solutions revenue amounted to $787.5 million, up 51%, mostly driven by the growth of GMV. GMV was $41.8 billion in the third quarter, up 35% from the previous year.

Shopify president Harley Finkelstein said, “It took 15 years for our merchants to get to $200 billion in cumulative GMV, and just 16 months to double that to $400 billion. Our merchants’ GMV remained strong in Q3. As the share of GMV from offline expanded within our total GMV, it is clear that entrepreneurs are embracing a future in which retail happens everywhere.

“Shopify is making it easier for more merchants worldwide to build direct and authentic relationships with their customers, in creative ways that work best for them.”

Shopify continues to expect to grow revenue in 2021, but at a lower rate than in 2020. (See Insiders’ Hot Stocks on TipRanks)

Following the results, Jefferies analyst Samad Samana maintained a Buy rating on SHOP and a price target of $1,800 (C$2,227.14). This implies 33.4% upside potential.

Samana noted that Shopify’s GMV of $41.8 billion, representing 35% year-over-year growth, failed to hit consensus at $43.3 billion, and drove third quarter results down, but his initial impression was that these results were “better than the buyside feared.”

Merchant Services take rate improved, which he thinks is critical because it shows that GMV’s Shopify monetization has continued to improve, which bodes well for the long haul.

Overall, consensus on the Street is that SHOP is a Moderate Buy based on seven Buys and seven Holds. The average Shopify price target of C$2,088.18 implies upside potential of 24% to current levels.