Why Shopify Stock Popped 27% This Week

Shares of Shopify (SHOP 22.36%) are up 27.2% this week as of Thursday's close, according to data provided by S&P Global Market Intelligence, after the e-commerce platform company announced strong quarterly results.

Shopify popped more than 22% on Thursday alone after its third-quarter update hit the wires. Revenue was up 25% year over year, to $1.714 billion, translating to non-GAAP (adjusted) net income of $0.24 per share (swinging from a net loss of $0.02 per share in the same year-ago period). Analysts, on average, were only expecting adjusted net income of $0.14 per share on revenue of $1.67 billion.

Within Shopify's top line, subscription solutions revenue climbed 29% year over year to $486 million. The merchant solutions segment revenue grew 24% to $1.2 billion, helped by a 22% increase in gross merchandise volume (to $56.2 billion) and growth from Shopify Payments. The company announced an exciting partnership with Amazon (AMZN 0.78%) during the quarter as well, with an app integration allowing U.S. merchants using Amazon's fulfillment network the option to add the "Buy with Prime" app into Shopify Checkout. Transactions through the partnership are processed through Shopify Payments.

Meanwhile, monthly recurring revenue increased 32% to $141 million, driven by momentum across all of Shopify's subscription plans. Shopify also achieved its fourth straight quarter of positive free cash flow, with free cash flow of $276 million (or 16% of revenue) swinging from negative $148 million in last year's third quarter.

"As we look forward to the busiest shopping season of the year, we're confident that our unified commerce platform empowers our merchants with the tools they need to seize every opportunity and achieve greater success," added Shopify CEO Harley Finkelstein.

Looking ahead to the rest of 2023, Shopify didn't provide specific revenue or earnings guidance. But management did state they now expect full-year revenue to increase in the range of 20% to 30%, capped by fourth-quarter revenue growth in the range of 10% to 20%. By comparison, most analysts were already expecting fourth-quarter revenue growth of around 19.8%, with full-year revenue growth closer to 24%. Finally, Shopify anticipates fourth-quarter free cash flow as a percentage of revenue in the high teens, continuing the year's upward trajectory with steady improvements for the metric.

In the end, there was little not to like in this report if you're a Shopify bull. And with the 2023 holiday shopping season fast approaching, it's no surprise the leading e-commerce stock is rallying in response.