when is shopify earnings

Shopify Earnings | Why Are Shares SKYROCKETING? shopify's investors are having a good,day today afte

Brian Feroldi

Updated on Jan 13,2023

Shopify Earnings | Why Are Shares SKYROCKETING?

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Shopify Earnings | Why Are Shares SKYROCKETING?

shopify's investors are having a good,day today after the company reported its,Q3 2022 results what did the company say,that has investors so excited here's,everything you need to know about,shopify's Q3 in about 10 minutes my name,is Brian fraldi and as of the time it's,recording I do own shares of Shopify,which is a 44 billion dollar company,trading under the ticker symbol s-h-o-p,revenue for the corridor grew 22 percent,to 1.366 million beating wall Street's,estimate of 1.3 billion management does,not give a specific Revenue guidance,number but they did say that Merchant,Solutions will grow twice as fast as,subscription solutions that did happen,earnings per share came in at two cents,on an adjusted basis down substantially,from positive 22 cents in the year ago,period beating wall Street's estimate of,a seven cents loss so the headline,numbers looked good margins did not look,good declining everywhere gross margin,Downs sharply to just 48.5 percent,operating margin came at negative 3.3,percent net margin negative 2.2 percent,those numbers are on a non-gaap basis,free cash flow very ugly a sharp,turnaround uh negative 434 million,dollars for the quarter net income,negative 30 million dollars that's a,non-gaap number the good news is the,balance sheet remains in great shape,plenty of liquidity to fund all the,company's initiatives let's take a close,closer look at the financials that this,company put out so Revenue growth in,subscriptions grew 12 percent,gross profit dollars in this business,line grew nine percent so gross profit,was under pressure here growing slower,than Revenue Merchant Solutions was the,big star of the quarter growing 26,however gross profit in merchant,Solutions only grew eight percent so big,time gross margin pressure in both uh,business units operating expenses,ballooned absolutely ballooned,everywhere growing very very uh sharply,you can see that the company reported 21,growth in adjusted sales and marketing,expenses 88 growth in research and,development expenses this is a big big,jump in part due to their acquisition of,uh deliver G A expenses grew 78 so,expenses grew far faster than Revenue,did leading to a big balloon in loss,from operations,in other news if you go one line below,that we see that operating income other,operating income uh went from 1.3,billion last year to 188 million this,year remember this is largely due to the,company's investment in a firm this,number is going to bounce around with,whatever happens to a firm's stock so,because of that net income is not a,reliable indicator for this company uh,at all,gross merchandising volume had a decent,quarter growing 11 to 46.2 billion that,was good to see in other news the,company announced that it launched a,Shopify collabs which lets shopify's,users connect and find with influencers,to partner with to sell their products,that's an interesting business that,should be exciting for the company's,customers Shopify Capital continues to,lend and book four billion dollars in,cumulative Capital advancing uh during,the quarter so this remains a popular,product the company also signed a new,partnership with Ernst young and KPMG so,it now has three of the biggest,Consultants on the on the world,promoting the company's product to,potential businesses here is the key,thing to focus on for investors they are,making massive investments in Shopify,fulfillment Network and they are making,big time advances here specifically with,two Day deliveries to me this is the,thing to watch the company's been,pouring huge amounts of capital into,this over the last couple of years to,really help their customers compete more,effectively with Amazon and we do have,some signs that this is working more on,that in a little bit now Merchant,Solutions the attach rate so this number,divided by gross merchandising volume,continues to tick up so they are,continuing to generate more and more,revenue from their customers thanks to,Merchant Solutions nice to see that and,Shopify payment well processed 54 of,total gross merchandise development,platform up from 49 last year and even,up 113 basis points sequentially so,Shopify payments continues to grow well,here to me was the money quote of the,entire conference call in September,alone own shopify's fulfillment networks,saw over two-thirds of domestic packages,delivered within two business days an,exponential increase from less than two,percent predicted delivery before the,network was updated in early,2021. so their investments in the,Shopify for filming Network are leading,to two business day delivery that is,huge for their customers,turning to guidance moving forward,management is guiding does not guide for,Revenue guidance but Wall Street is,expecting 16 growth uh next quarter to,1.6 billion dollars management gave no,guidance on earnings per share other,than to say that operating expense,growth in Q4 will decelerate,sequentially uh substantially so that,will be something to watch Wall Street,is expecting for what it's worth five,cents in an adjusted loss per share,versus 18 year ago for the full year,management guidance is on a revenue,basis is that Merchant Solutions will,continue to outpace subscription,solutions for what it's worth Wall,Street is currently expecting about 5.5,billion into our Revenue up 19 and a 16,16 loss per share down sharply from 84,cents a year ago here is the detailed,look at Management's guidance I think to,note here is that gross profit will,still be under pressure as the company,continues to shift more towards Merchant,Solutions and it integrates uh deliver,the company's big acquisition that it,made last year and stock based,compensation and capital expenditure,expenses are expected to come in below,their previous year's Outlook so what,should investors March moving forward,first keep an eye on Gross merchandising,value we want to see this number,continue to grow at a double digit rate,second watch the Fulfillment Network,this is where Shopify is putting so much,Capital we want to see the Fulfillment,number continue to grow,Third Watch operating margins operating,margins are the numbers here for,investors to watch to indicate,profitability right now these are Under,massive pressure we want to see them,eventually normalize and Fourth Watch,free cash flow we think that the moat of,this business is stable right now,potentially even widening over time as,the Shopify fulfillment Network,continues to ship faster to businesses,and the thesis is somewhere between,yellow flag and green flag the,financials are heading not in a great,Direction below the top line but the,business is getting stronger under,underneath that we ran this company,through our investing Frameworks and it,got a 77 on mine and a 12 on Brian,stoffel's range both are investable or,in the anti-fragile category shifting to,valuation where is Shopify on this curve,we think it's somewhere around here the,hyper Revenue growth is behind the,company but it has not achieved,profitability for that reason when we,think about shopify's income statement,it's opt demise for Revenue cost of,goods sold and gross profit although not,fully for that reason the price to sales,and the price to gross profit are going,to be the only real metrics that we can,look at to judge this company's value so,let's do that so Shopify is priced to,sales ratio is currently about 8.5,historically a low a low number,the company's all-time low Enterprises,sales is about 6.4 in 2016 and then you,see you just went on a Nutty expansion,phrase gross profit was 2.6 billion,divided by the company's current market,cap of 44 billion dollars gives us a,gross price to gross profit ratio of,about 16. that is high very high in,absolute terms and indicates that Wall,Street is still pricing this business at,a premium price to free cash flow there,is a little bit of free cash flow on a,trailing basis but not much so this,number is 730 or or so the company is,not optimized for free cash flow so this,is not a really great metric for,investors to look at the bottom line for,me as a long-term Shopify shareholder uh,there are reasons to be optimistic based,on this report revenue is still growing,and the Shopify fulfillment network is,getting built out but this company still,has work to do my hope is that 2023 will,see the company's growth rate normalize,that will be the true growth rate as the,comparison has become much easier than,they were this year and 2024 will,hopefully be the year that the company,really starts to focus on profitability,again uh personally I'm not going to be,selling my shares of Shopify I hope that,the future continues to look bright as,today would indicate but we still have,some waiting to do to find that out hope,that you found this video to be useful,if so please give it the thumbs up and,let us know what stocks you're,interested in us covering earnings on,next Brian out

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