Shares of the Ottawa-based e-commerce company Shopify Inc. (TSX:SHOP)(NYSE:SHOP) were down 10.55% at the bottom of the noon hour on October 31. The company released its third quarter results today. Revenue climbed 72% to $171.5 million with subscription solutions revenue up 65% to $82.4 million.
Gross profit jumped 86% to $100 million and adjusted net income was reported at $5 million or $0.05 per share compared with an adjusted net loss of $1.8 million or $0.02 per share in Q3 2016.
Shopify stock has experienced downward pressure since it became the target of famed short-seller Andrew Left and his investment newsletter Citron Research. Left asserted that Shopify was overvalued due to a business model that perpetuated “get-rich-quick schemes”. Shopify CEO Tobi Lütke responded by questioning Left’s credibility immediately following the criticism, calling him a “short-selling troll”.
All the bluster aside, Shopify shares have now lost over $20 of value since the comments from Left in his newsletter. However, there are still bright spots for Shopify and many reasons for investors to buy into this dip.
These third quarter results show improvement in a number of areas, but investors will be looking for profitability over the next few quarters. E-commerce continues to grow at a tremendous rate in the U.S. and Canada. Retail sales numbers reported by Statistics Canada showed that in August e-commerce retail sales were up 41.9% year over year.
I still like Shopify’s long-term outlook, though it will be far more volatile looking ahead.
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