Shopify Earnings Due, Rebounds After Short-Seller Citron Battle

E-commerce software provider Shopify (SHOP) heads into its fourth-quarter earnings announcement Thursday with a strong rally, having quelled short seller Citron Research’s criticism of its business model.

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Analysts estimate a 5-cent profit in the December quarter vs. zero earnings a year earlier with revenue rising 60% to $208 million. The company should get a seasonal boost from holiday season shopping, like (AMZN), analysts say.

“Shopify’s Q4 results are likely to come in strong, but the initial 2018 revenue outlook could be below buy-side expectations,” said Deepak Mathivanan, a Barclays analyst in a report.

Shopify has gained over 30% since posting its first-ever adjusted profit in the September quarter. Shares in Shopify surged 9.1% to close at 137.56 on the stock market today.

Shares fell prior to its third-quarter earnings as Citron raised questions over how the company acquires small business customers, with one analyst calling Shopify a “battleground” stock. Short interest in Shopify rose in December and January even as the stock regained an all-time high.

Shopify sets up e-commerce websites for small businesses, and partners with others to handle digital payments and shipping. Management has prioritized growth over profitability. Shopify has been investing in premium “Shopify plus” services.

Merchants use Shopify’s software to support sales channels over the web, mobile devices, social media and retail outlets.

“We expect Shopify to beat on Q4 given conservative assumptions in guidance and a strong e-commerce backdrop,” said Ross MacMillan, a RBC Capital analyst in a report. “We expect upside to 2018 estimates, but moderating beats on revenues, coupled with strong gross profit growth.”

For full-year 2018, analysts estimate profit of 26 cents a share on revenue of $949 million.

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