Shopify Surges On Strong Sales Growth Outlook

Revenue for the period rose about 26% to US$2.16 billion

(Bloomberg) — Shopify Inc. soared after saying it will sustain rapid sales growth into the holiday shopping season, suggesting the Canadian e-commerce company’s strategy to lure larger businesses is paying off.

Shopify said it expects percentage revenue growth for the current quarter ending in December to be in the mid to high twenties on a year-over-year basis. Analysts were looking for 23%.

Shopify added 16 new enterprise clients in the third quarter, President Harley Finkelstein told investors on a Tuesday call. That helped boost revenue for the period by 26% to $2.16 billion, the company said in a statement Tuesday, beating the $2.12 billion average estimate of analysts surveyed by Bloomberg.

In addition to attracting bigger customers, Shopify is benefiting from strength across Europe, more clients using its in-store payments tools and rapid growth in the business-to-business segment that’s attracting wholesale suppliers, Finkelstein said.

“Shopify is not just for small businesses in North America,” he said. “We’re for every sized brand everywhere in the world.”

The US-traded shares surged as much as 26% to $23, their biggest intraday gain in more than a year and the highest price in almost three years.

The effort to attract larger companies such as Mattel Inc. is a dramatic change for the Ottawa-based company, which for years focused mostly on mom-and-pops looking to set up online stores. Shopify is betting that the order volume generated by bigger retailers will help it grow more quickly than by relying on its existing base of smaller firms.

Shopify abandoned plans to build a logistics operation that would have helped it grow by selling more services to customers it already has. Without that, the company needed to find new customers.

Gross merchandise volume, the overall value of merchant sales across Shopify’s systems, was $69.7 billion, beating Wall Street projections of $67.8 billion.

Amazon.com Inc., a Shopify rival, also reported strong third-quarter results earlier this month, with revenue from the online store unit increasing 7% to $61.4 billion.

(Updated with CEO comments in third paragraph)