I just ran a few numbers on Shopify revenue. Bear with me for bit…
In 2016 SHOP had 389.3 million in revenue
In 2017 SHOP had 673.3 million in revenue, growth of ~73%.
In 2018 SHOP has forecasted for about 1.03 billion in revenue, growth of ~53%
So far in 2018 SHOP has revenue of 459 million compared with first two quarters of 2017 of 279.1 million, growth of 64.4 comparing first half of those respective years.
In the last half of 2017 SHOP had revenue of 394.3 million, compared with 2018 forecast of 544 million based upon the 1.03 billion forecast (upper end of forecast I might add). This growth is ~38% compared halves to halves. I sometimes compare half years like this when a company like SHOP has seasonality to it’s revenue stream.
See where I’m going here?
Let’s get to my final point. Revenue in Q4 2017 was 222.8 million. Using SHOP projections (257 million for Q3 rev estimate and 1.03 billion for yearly rev estimate gives you 714 million of revenue through 3 quarters) that means revenue estimate for Q4 is 287 million (this is their high end projection). This represents yoy Q4 growth of only 29%! What? Even at 300 million its 34.6%. It needs to be 335 million to be 50% revenue growth.
Are they completely sandbagging revenue by 40-50 million for Q4? Am I wrong here or missing something? This combined with the increase in OpEx has me concerned.
MC
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Let’s get to my final point. Revenue in Q4 2017 was 222.8 million. Using SHOP projections (257 million for Q3 rev estimate and 1.03 billion for yearly rev estimate gives you 714 million of revenue through 3 quarters) that means revenue estimate for Q4 is 287 million (this is their high end projection). This represents yoy Q4 growth of only 29%! What? Even at 300 million its 34.6%. It needs to be 335 million to be 50% revenue growth.
Are they completely sandbagging revenue by 40-50 million for Q4? Am I wrong here or missing something?
You’re missing something. 1030 - 714 = 316, not 287.
Actually the high end is 1.025b, so using 311m for Q4 we get 39% growth, but of course they are sandbagging for Q3 and Q4. I’d expect both quarters to be in the low 50%'s range.
Bear
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I knew I was missing something… a friggin zero. I plugged 1003 in my calculator instead of 1030… I’m an idiot. Thanks bear.
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Hi Bear,
Actually the high end is 1.025b, so using 311m for Q4 we get 39% growth, but of course they are sandbagging for Q3 and Q4. I’d expect both quarters to be in the low 50%'s range.
They stated in the conference call that they would still be getting charges for their data center build out next quarter. But the 4th quarter they would be free of the legacy data center and be moved onto the cloud. But the cloud will be lower margins because it is a higher expense. I am thinking the next two quarters will be in the mid 50’s on gross margins and they will come out the year of 2018 with gross margins around 57%. Shop is claiming margins of low 50 %s. We will see. Anyway, read this article and see what Bert has to say in the comments section. I think it makes a lot of sense. The article brings up a lot of the same arguments others have made on this board.
https://seekingalpha.com/article/4194112-shopify-increasingl…
Andy
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