Canada's top emerging technology company, Shopify Inc., continues to outperform expectations, reporting 2016 results Wednesday and introducing 2017 financial forecasts that were well ahead of analyst targets.
The Ottawa company's stock rose by more than eight per cent and has now gained more than 250 per cent since it went public in May 2015 at $17 a share.
"I think the company is in really, really, really good shape right now," chief executive and co-founder Tobi Lutke said on a conference call with analysts.
Shopify, which provides a cloud-based online software platform used primarily by small and medium-sized retailers to manage their e-commerce and bricks and mortar operations, booked revenue of $130.4-million (U.S.) in the fourth quarter, an increase of 86 per cent over the same period a year earlier. That exceeded average analyst forecasts of $121.7-million as well as the guidance Shopify had provided to the Street.
The company also posted a $9.3-million operating loss, up from $6.5-million in the fourth quarter of 2015. But analysts were watching for the "adjusted operating loss," which amounted to $0.8-million, well below expectations. The company posted a quarterly net loss of $8.9-million, or 10 cents per share.
The fourth quarter is Shopify's busiest, encompassing the holiday shopping season. Shopify ended the year with 377,500 merchants using its platform, up by more than 50,000 since Sept 30, and said merchants on average increased the value of merchandise sold through the platform in 2016 by 25 per cent year over year
The company also said it expected revenue in 2017 to range between $580-million and $600-million, ahead of average analyst expectations of $562-million. That would represent a 49 per cent-plus increase over the company's $389.3-million revenue for 2016. Revenues are expected to be $120 million in the first quarter, up 65 per cent year over year.
"Shopify delivered an exemplary quarter and revenue growth outlook, Canaccord Genuity analyst Richard Davis wrote in a note. "Given the high probability that Shopify will execute well this year and beyond, there should be plenty of growth investors waiting in line to buy this stock"
Shopify management reiterated its earlier goal to exit 2017 running its business in the black on an operating profit basis. But analysts questioned on a conference call why it forecast a full-year operating loss of $73 million and $77 million, double last year's level.
Senior management responded the company would be continuing to invest in expanding the company's offerings to merchants. Last year, Shopify has launched retail channels on Facebook Messenger and Amazon, expanded its shipping services, retooled its mobile app and launched a merchant financing division, which provided $35 million in cash advances to customers in the fourth quarter. Shopify also more than doubled the number of larger customers using its "Shopify Plus" offering to 2,500, adding such brands in the fourth quarter as Moet Hennessy and the Wall Street Journal.
"We're in a very strong position," chief financial officer Russ Jones said. "We just think investing for the long term is the right thing to do."
Citi Research analyst Ken Wong wrote in a research note: "The strong quarter and guid[ance] should be enough for [the fourth-quarter results] to be viewed positively" and lead the stock price "to trend higher."
Despite opposition and a threatened boycott from some merchants and customers to the fact Shopify hosts the online store of alt-right publication Breitbart News, there was no evidence of any impact on its results, and analysts asked no questions pertaining to the matter.