Shopify Stock Rises With Better-Than-Expected 2Q, Upbeat Outlook — Update

By Adriano Marchese

Shopify projected better-than-expected sales growth for the current quarter after attracting more merchants and withstanding a shaky consumer spending environment.

The outlook, plus outperformance in the second quarter, boosted shares 22.3% in recent trading to $66.33, putting it on pace for the largest single-day increase on record.

Executives at the Ottawa-based company, which provides technological infrastructure for online storefronts, said Wednesday that the breadth of its merchants across categories and geographies is helping blunt some of the softness among consumers.

"I think a big part of the reason we are not seeing the same thing that others might is because we simply have merchants across a ton of verticals and across a ton of geos," Shopify President Harley Finkelstein said. He noted that Shopify merchants include everything from medical scrub maker Figs and pet products company Barkbox, as well larger companies such as Nestle, H.J. Heinz and Mattel.

For the third-quarter, Shopify said it expects revenue to rise in the low-to-mid-twenties percent range, ahead of the 21.1% expected by analysts, according to FactSet.

Shopify also reported second-quarter revenue and profit ahead of expectations. Revenue rose more than the company's earlier forecast, helped by outperformance in Europe.

For the quarter ended June 30, Shopify reported a profit of $170 million, or 13 cents a share, compared with a loss of $1.3 billion, or $1.02 a share, in the prior-year period. Adjusted earnings were 26 cents a share, higher than the 20 cents a share analysts expected.

Revenue rose 21% to $2.05 billion, ahead of analyst expectations for $2.01 billion. That included a drag from last year's sale of its logistics business.

Gross merchandise volume, a key metric that measures the total value of orders processed on Shopify's platform, rose 22% to $67.2 billion.

The results come as companies navigate a shaky consumer spending environment across the globe. Meanwhile, e-commerce players are facing fresh competition from low-cost players angling for a large slice of the market.

A key driver of growth has been Shopify's marketing that has helped draw more merchants to use its tools to manage their storefronts. In the latest quarter, Shopify said it added 30% more international merchants, including the soccer club Newcastle United and the luxury brand Ami Paris.

Shopify plans to continue to spend more on marketing in the third quarter, particularly to attract bigger customers domestically and in international markets.

Write to Adriano Marchese at adriano.marchese@wsj.com

(END) Dow Jones Newswires

August 07, 2024 12:03 ET (16:03 GMT)

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