Shopify has undergone a flourished time since its first introduction in 2015. Today, the company includes more than 609,000 businesses and a growing number of business customers worldwide. Annual revenue has significantly increased 425% but the stock has crashed over 550%.
As a matter of concern, slowing growth negatively influenced on the e-commerce providers’ stock last quarter. Before market’s open on 31st of July, Shopify launched its second-quarter financial report. Let’s look quickly at the final results and go for a potential indication.
For the first quarter, Shopify got revenue of $214.3 million, higher 68% than that of last year. Though it was probably an impressive result to many companies, it became the slowest rate during the historical establishment of Shopify. The company kept pouring all income for worldwide expansion; however, it resulted conversely in an operating loss of $20.3 million and a shareprice decrease of $0.16.
For the second quarter, Shopify reported revenue of $230 to $235 million, which would respectively be a yearly growth of 52% to 55%. The number tended to gradually decrease from the 68% of last quarter. Moreover, the company suffered from operating loss in a range of $5 million to $7 million which brought down its share price of $0.05 to $0.07.
It is known as Shopify’s monthly recurring revenue (MRR), found within company’s subscriptions segment. Since business activity is based on subscription, recurring revenue can be a leading factor in Shopify’s success.
In the first quarter, MRR raised to $32.5 million, up 57% compared to the previous quarter. Shopify Plus, the company’s enterprise option, contributes partly to the company’s growth potential. It accounted for $7 million, taking up 22% of total MRR and higher 17% than that of last year.
Shopify investors have experienced excessive volatility which is influenced directly by the company’s market cap of $18 billion and its enormous valuation. Shopify has not been profitable on a GAAP basis, so using the price-to-earnings ratio is removed and make way for price-to-sales (P/S) ratio. It also means that if the company’s results fail to live up to the market’s high expectations, the stock price could crash as it happened in the past.