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Shopify Inc. surpassed revenue forecasts in its most recent quarter, sending shares up 12 per cent Thursday after months of volatility as the e-commerce platform maker increased its guidance.

While the company’s third-quarter loss more than doubled to US$23-million, or US$0.22 a share, over the same quarter last year, it brought in US$270-million, or 58 per cent more revenue. Three months ago, Shopify said its high-end revenue forecast would be US$257-million, while analysts were expecting US$258-million for the quarter ending Sept. 30. Its New York-listed shares closed Thursday at US$136.99 after falling nearly 30 per cent from its US$173.78 close July 25.

But while Shopify raised its full-year 2018 forecast slightly to a range of US$1.045-billion to US$1.055-billion, its projections for the fourth quarter prompted some analyst caution. Fuelled by Black Friday and Cyber Monday sales, the fourth quarter is traditionally Shopify’s biggest. Brian Peterson of Raymond James noted its fourth-quarter revenue forecast range of US$315-million to US$325-million represented quarter-to-quarter growth of about 19 per cent – a “quite conservative” range compared to the nearly 30-per-cent growth in the past two fiscal-year-end quarters.

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The Ottawa company has spent the past year trying to recast itself from a retail tool for small businesses to a multichannel platform to support entrepreneurship at all levels. It added functions such as cash advances and shipping services to assist smaller users as it takes on massive clients on its high-end Shopify Plus tier with vendors including Kylie Jenner’s cosmetics line and Lays potato chips. It recently opened up its first bricks-and-mortar store in Los Angeles to entice new merchants, and has said it will invest up to half a billion dollars to centralize and expand its Toronto-based staff.

The next quarter is a key one for the company, especially given its efforts to become a crucial platform for recreational cannabis sales in Canada. Chief operating officer Harley Finkelstein said on a conference call with analysts Thursday that cannabis-sales projections had been “baked into” Shopify’s forecast for the quarter. Online government-led pot sales in Ontario, British Columbia, Prince Edward Island and Newfoundland and Labrador are powered through Shopify, as are many sales through private retailers – once legalization hit, the platform was processing more than 100 orders a minute in the country.

The early success in Canada, Mr. Finkelstein continued, should make for a calling card for other jurisdictions. “We are proud of what we’ve been able to accomplish in a tight period of time given the complexities of introducing a new and regulated industry,” he said. “… As more countries think about their own regulated industries, whether it’s cannabis or otherwise, we become that first phone call, which is really important to us.”

One of Shopify’s key metrics is gross merchandise volume, or GMV – the total value of orders processed on the platform – which hit US$10-billion in the quarter. While that rose 55 per cent over the same period last year, its growth has been decelerating on a quarterly basis – year-over-year growth was 56 per cent in second-quarter 2018, 64 per cent the quarter before that and nearly 100 per cent in 2016.

But with Canadian recreational cannabis sales, Mr. Finkelstein said, “we have built the contracts to capture the upside of GMV from these provinces and from these private providers of cannabis.”

Shopify declined to provide detailed figures on its total merchant count this quarter – it’s said it “powers over 600,000 businesses” in its past four earnings releases. But RBC Dominion Securities analyst Ross MacMillan wrote Thursday morning that he believed that merchant adds might be slowing.

This, he said, is likely because the company saw a greater monthly-recurring-revenue (MRR) contribution from large-retailer Shopify Plus customers at the same time as total MRR is decelerating – 41-per-cent growth to US$38-million in the third quarter, versus 49-per-cent growth in the second quarter. He kept his target price for the stock at US$157.

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Shopify’s operating expenses grew 61 per cent to US$181-million in the third quarter as it made significant investments across both sales and marketing and research and development.

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