Shopify tumbles after earnings fail to impress Wall Street

Shopify tumbles after earnings fail to impress Wall Street

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Shopify Inc. reported sales and profit for the fourth quarter that narrowly beat analysts’ estimates, but that didn’t impress Wall Street after the stock more than doubled last year.

Revenue for the period rose 24 per cent to US$2.1 billion, beating the US$2.08 billion average estimate of analysts surveyed by Bloomberg. Profit, excluding one-time items, was 34 cents a share, above the 30-cent expectation.

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Shopify shares tumbled more than 9 per cent in early trading Tuesday. The company said it expects a free cash flow margin in the current quarter in the “high single digits,” while analysts were expecting 13.6 per cent. That miss “stands out as the only negative indicator and may be behind the stock dropping,” Anurag Rana, an analyst at Bloomberg Intelligence, wrote in a note.

Shopify said that revenue in the current quarter would grow at a “low-twenties percentage rate.” The company said that would translate into a year-over-year rate in the mid-to-high twenties when adjusting for the sale of its logistics business.

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The Ottawa-based company raised software prices for online merchants earlier this month, a move that’s expected to generate more than US$100 million in additional revenue this year without driving away many customers. Shopify is in its first year of a deal with Inc. to let merchants use its “Buy With Prime” delivery service. Shopify sold its own logistics business to freight-forwarding startup Flexport last year.

Gross merchandise volume, the overall value of merchant sales across Shopify’s systems, increased 23 per cent to US$75.1 billion, above Wall Street projections of US$71.6 billion.

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