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Shopify (SHOP) Q3 Earnings Miss Estimates, Q4 View Tepid

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Shopify Inc. SHOP reported third-quarter 2021 adjusted earnings of 81 cents per share, which missed the Zacks Consensus Estimate by 36.7% and declined 28.3% year over year.

Total revenues surged 46% year over year to $1.12 billion, which lagged the Zacks Consensus Estimate by 2.3%. The top line benefited from strong growth witnessed in Subscription Solutions and Merchant Solutions revenues.

Shopify provided a tepid fourth-quarter outlook. The company expects the fourth quarter to contribute the largest share of full-year revenues while GMV is expected to continue to grow substantially faster than the commerce market. However, supply chain delays, as well as increased costs for materials, labor, shipping or advertising, are expected to remain as overhangs on growth prospects.

Shopify shares were down 1% in pre-market trading. The stock has returned 28.7% year to date, underperforming the Zacks Internet-Services industry’s growth of 39.8%.

Shopify Inc. Price, Consensus and EPS Surprise

Shopify Inc. Price, Consensus and EPS Surprise
Shopify Inc. Price, Consensus and EPS Surprise

Shopify Inc. price-consensus-eps-surprise-chart | Shopify Inc. Quote

Quarter in Detail

Subscription Solutions revenues surged 37% year over year to $336.2 million, driven by the addition of new merchants.

Merchant Solutions revenues soared 51% to $787.5 million, primarily due to growth in Gross Merchandise Volume (GMV) that improved 35% year over year to $41.8 billion.

As of Sep 30, 2021, Monthly Recurring Revenue (“MRR”) was $98.8 million, up 33% from the year-ago quarter. The growth benefited from more merchants joining the platform and increase in the number of retail locations using POS Pro.

Shopify Plus accounted for $27.2 million, representing 28% of MRR compared with 25% in the quarter ended Sep 30, 2020.

Gross Payments Volume (GPV) was $20.5 billion, constituting 49% of GMV processed in the third quarter compared with $14 billion (45% of GMV) in the year-ago quarter.

Shopify Capital advanced $393.6 million in cash and loans to merchants in the United States, Canada and the U.K. in the reported quarter, up 56% year over year. Since the launch of Shopify Capital, cumulative merchant cash advances have risen to $2.7 billion, out of which $524 million was outstanding as of Sep 30, 2021.

Operating Details

Non-GAAP gross profit increased 49.4% year over year to $616.4 million. Gross margin expanded 100 basis points (bps) from the year-ago quarter’s level to 55%.

Non-GAAP operating expenses surged 69.1% year over year to $476.3 million.

Shopify reported adjusted operating income of $140.2 million, up 7% year over year. Operating margin contracted 500 bps on a year-over-year basis to 12%.

Balance Sheet

As of Sep 30, 2021, Shopify ended the reported quarter with cash, cash equivalents and marketable securities balance of $7.52 billion compared with $7.76 billion as of Jun 30, 2021.


Shopify expects revenues to grow rapidly in 2021 albeit at a lower rate compared with 2020.

For 2021, the company expects Subscriptions Solutions’ revenue growth to be driven by more merchants joining the platform, the tally for which is anticipated to be lower than the figure in 2020 but higher compared with any year prior to 2020.

Continued GMV growth, driven by existing merchant base, new merchants and expanded adoption of Shopify’s growing portfolio of merchant solutions, is anticipated to boost Merchant solutions revenue growth.

Momentum in Shopify Payments, Shopify Shipping and Shopify Capital, and the growing clout of newer solutions such as Shopify Fulfillment Network and 6 River Systems, are expected to contribute to revenue growth.

Shopify expects gross profit to grow rapidly in 2021. The company continues to expect full-year 2021 adjusted operating income to be above the level it achieved in 2020.

Zacks Rank & Other Stocks to Consider

Shopify currently has a Zacks Rank #5 (Strong Sell).

Better-ranked stocks in the broader technology sector are DXC Technology DXC, Etsy ETSY and Fastly FSLY. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

All three companies are set to report their quarterly earnings on Nov 3.

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