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Shopify's Rollercoaster Quarter: Shares Soar 21% on Growth, then Dip 5% Amid Investment Volatility

Mover TrackerThursday, Nov 14, 2024 5:31 pm ET
1min read

Shopify recently reported its third-quarter financial results for 2024, showcasing a period of impressive growth. Despite a subsequent dip in share prices by 5.22% on November 14, the company's previous announcement led to a significant share increase of 21.04%, underscoring investor optimism.

The Canadian e-commerce solutions provider divides its revenue into subscription solutions and merchant solutions, spreading across a global market. Subscription solutions, primarily aimed at B2B clients, accounted for approximately 28% of total revenue in the first nine months of 2024. This segment includes notable clients like Mattel, Heinz, and Netflix, contributing to a 28.35% year-over-year revenue increase, reaching $1.684 billion.

However, the bulk of Shopify's income arises from merchant solutions, particularly fees from Shopify Payments and currency conversions. This service facilitates seamless payment processing for merchants both online and offline. Additionally, the merchant solutions encompass third-party commissions and services like Shopify Capital, which offers financial support to businesses in the U.S., the U.K., Canada, and Australia. The merchant solutions' revenue grew 21.64% to $4.384 billion, closely tied to platform GMV, which reached $197.8 billion, marking a 23% increase.

Despite this financial prowess, a substantial portion of Shopify's profits is linked to investments. In the third quarter, the company reported $512 million in unrealized gains from equities and investments, though this figure decreased 7.75% from the previous year, reflecting the volatility linked to such investment gains. This volatility highlights the dependency on market fluctuations for profitability, as investment gains exceeded operational profits, contributing to a modest 15.32% net income growth, totaling $828 million.

Overall, Shopify's scale advantage in e-commerce is evident, yet its profit margins remain subject to investment fluctuations. While the current business outlook remains strong due to its expansive e-commerce role, the dependency on investment returns suggests a potential for future earnings volatility.

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pellosanto
11/15
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Cannannaca
11/15
$NFLX is making no blunders if this trend continues. On January 21st (during their earnings week), they'll either have to deliver stellar guidance or risk seeing shares rise above $1,000. If they fail to impress, a stock split is a distinct possibility—regardless of whether the guidance is good or bad. This scenario poses a risk on both sides of the trade. $NFLX will need massive beats to justify a $100 billion market cap in just three weeks. Buying now is sheer lunacy, as you're likely to miss out. Shorting is risky too, given that the stock should continue climbing through the year.
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User avatar and name identifying the post author
11/14

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Blackhole1123
11/14
Well, looks like someone's got a rollercoaster of emotions invested in Shopify. Seriously though, 23% GMV increase is no joke. Maybe it's time to take a seat and enjoy the ride?
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getintocollegern
11/14
I'm just here for the Shopify Capital bit. Hope they expand it to more countries soon! Would love to see more small businesses thrive with their financial support.
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kenton143
11/14
Held Shopify since 2020, and while the dips can be scary, the growth always bounces back. This too shall pass. Believe in the e-commerce giant!
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urfaselol
11/14
Can someone explain why investment gains/losses affect net income so significantly? Isn't that just market fluctuations and not actual operational performance?
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greenpride32
11/14
Just added Shopify to my watchlist! 21% increase is insane. Their platform GMV growth is through the roof. This stock's got potential for a moonshot, imo.
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S_H_R_O_O_M_S999
11/14
The fact that investment gains > operational profits is what's really concerning me. Can Shopify sustain this through economic downturns? Not sure I'm convinced on the long-term viability...
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ImplementEither7716
11/14
Liking the growth numbers, but that 5% dip on Nov 14 is giving me pause. Need to see how they balance investment volatility in Q4.
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