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Shopify forecasts solid revenue growth on higher prices, more signups

Shopify forecasts solid revenue growth on higher prices, more signups
© Reuters. The logo of Shopify is seen outside its headquarters in Ottawa, Ontario, Canada, September 28, 2018. REUTERS/Chris Wattie

By Yuvraj Malik

(Reuters) -Canada’s Shopify (NYSE:) forecast strong revenue growth and delivered better-than-expected results for the second quarter on Wednesday, helped by new signups and price increases across its services.

Merchants and businesses are turning to Shopify, which offers tools to create and manage online store-fronts, as retail spending picks up on signs of stabilizing macroeconomic conditions.

“We’re not just shipping products faster, but we are also expanding our global merchant base,” said Harley Finkelstein, president at Shopify.

In the third quarter, the company expects revenue growth at “low-twenties” percentage and “mid-twenties” when adjusted for changes related to the divestiture of its logistics business. Analysts expected a growth of 17.2%.

Following the results, Shopify’s U.S.-listed shares, which have surged nearly 80% so far this year, added 7% before settling marginally lower in extended trading.

The surge in Shopify’s share price comes amid a rejig in its business as a result of revenue growth slowing to about 20% in 2023 from an average of 60% in 2017-21, according to Refinitiv data.

The company had in May decided to lay off 20% of its workforce and divest its logistics arm to freight forwarder Flexport, sharpening its focus on costs.

Shopify had raised the prices of some of its plans, which went into effect in January and April.

In the second quarter, total revenue grew 31% to $1.69 billion and beat analysts’ average estimate of $1.62 billion.

However, a $1.7-billion charge related to the divestiture and recent staff cuts resulted in an operating loss on $1.6 billion. Excluding the one-time item, Shopify earned 14 cents per share, beating expectations of 5 cents.

“This could be a turnaround quarter for Shopify,” said Michael Schulman, chief investment officer at Running Point Capital Advisors.

“But the market will still question whether its actions are enough to counter stiff competition from established rivals as well as any mild economic cyclicality.”

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