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The Shopify sign is seen at its Toronto offices.Fred Lum/The Globe and Mail

Shopify Inc. has been the star of the Canadian tech scene since going public in 2015, beating analysts' estimates nine straight times.

With the Ottawa retail software firm set to report third-quarter earnings early Tuesday, investors are watching for two things: whether it can pull off No. 10, and what executives will say in their first substantive response to a short-seller whose attacks sent the stock tumbling this month.

On Oct. 4, Andrew Left of Citron Research assailed Shopify on his website and on Twitter, alleging it was "dirtier than Herbalife" – a nutritional and weight-loss products multilevel marketing firm that agreed to pay $200-million (U.S.) in a settlement with the U.S. Federal Trade Commission (FTC) after being accused of pyramid-scheme practices. Mr. Left, known as the "shock jock of short-sellers" for his incendiary attacks on publicly traded firms, criticized Shopify's affiliate marketing program that allows third-party promoters to earn commissions for persuading new merchant customers to sign up. It's a common practice for online merchants, including Amazon, but has drawn recent scrutiny from the FTC.

Mr. Left alleged many of Shopify's 500,000 merchant customers – who use its cloud software to run their online and bricks-and-mortar stores – "are not real merchants."

Read more: Andrew Left of Citron Research on why he's questioning Shopify

While sell-side analysts largely dismissed Mr. Left's accusations – Industrial Alliance Securities analyst Blair Abernethy called them "fully without merit" – investors were rattled. The stock, which had nearly tripled this year and surpassed $120 on the New York Stock Exchange in September, slumped to the low $90 range in the days following the report, but has since partly recovered, closing Friday at $107.27.

Shopify is expected to mount a more ardent defence than its initial response, which did not directly address Mr. Left's accusations.

A few days later, however, co-founder and chief executive officer Tobi Lutke promised on Twitter to "address the short-selling troll" targeting his firm on this week's earnings call.

Most investors are likely to be focused on the numbers. Shopify has a track record for beating and raising its forecasts and foresees revenue of between $642-million and $648-million this year, an operating loss of $62-million to $66-million and an "adjusted operating loss" of $7-million to $22-million.

For the third quarter, it has projected revenue of between $164-million and $166-million, an operating loss of $17-million to $19-million and an adjusted operating loss of $2-million to $4-million.

Analysts are on average calling for Shopify to slightly beat the upper end of its revenue range in the quarter and post a loss of 2 cents per share. The money-losing company has pledged to be profitable on an adjusted operating basis by the fourth quarter.

Morgan Stanley analyst Brian Essex said in a note he was "modelling another beat and raise," estimating revenues and operating earnings that are higher than the company's own guidance. Mr. Abernethy said Shopify continues to fortify its competitive position with its Shopify Plus platform geared at larger e-commerce players and by adding features that make it easier for merchants to sell through Amazon. Shopify, which primarily serves small and medium-sized online merchants, has been expanding on all fronts, offering more features such as merchant cash advances, payments and expanded shipping options.

At the same time, its lower-margin "merchant solutions" business – primarily payments processing for merchants – has grown at such a fast clip that it now accounts for more than half of revenues, with subscription fees for its software making up the balance. Macquarie Research analyst Gus Papageorgiou advised clients last week to watch for margin improvements in merchant solutions as Shopify scales up, and said he expected the company's operating profit margins, which have stopped improving in recent quarters, to grow again after recent increases in staffing and advertising spending.

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