Shopify (NYSE: SHOP) stock price is down almost 11% from the all-time high that it had hit three months ago. SHOP’s shares tumbled sharply after hitting $400 mark in August this year. The shares, however, regained momentum since it announced third-quarter results. It topped Q3 revenue estimates but lagged behind earnings consensus.
Shopify stock price is still up almost 123% in the past twelve months. SHOP shares are currently trading around $333. The company does not offer any dividend yield. Therefore, investors have to rely only on share price gains.
Strong Revenue Growth Helped in Reversing Negative Trend
The company has beaten a third-quarter revenue estimate by $6.73 million. Its Q3 revenue of $390.55 million rose 44% from the same period last year.
Subscription Solutions’ revenue jumped 37% year over year to $165.6 million. The revenue growth was driven by the boost in the number of merchants joining the Shopify platform. In addition, Merchant Solutions revenue increased 50% year over year to $225.0 million.
The company claims that overall revenue growth is the outcome of its expansion into international markets. “More than a million merchants are now building their businesses on Shopify, as more entrepreneurs around the world reach for independence,” said Tobi Lütke, Shopify’s CEO.
Its gross profit dollars rose 45% to $216.7 million in Q3, up from $149.7 million in the same period last year. SHOP’s cash position remains strong enough. It had $2.67 billion of cash at the end of the third quarter, high from $1.97 billion in the year-ago period.
Q4 Outlook Supports Shopify Stock Price
The company expects to generate Q4 revenue in the range of $472M to $482M compared to the consensus estimate of $471M. The full-year revenue guidance stands around $1.545B to $1.555B, in line with the consensus of $1.54B. Although overvalued valuations could negatively impact investor’s sentiments, higher revenue growth is the biggest catalyst for SHOP shares. In addition, the company is likely to turn to profitability in the following quarters.
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