Shares of Shopify (SHOP +16.98%) charged sharply higher on Wednesday, surging as much as 24.7%. As of 11:46 a.m. ET, the stock was still up 17.5%.
The catalyst that sent the e-commerce platform provider higher was its surprisingly robust results, despite the popular narrative that artificial intelligence (AI) could disrupt software-as-a-service (SaaS) stocks.
Image source: The Motley Fool.
Robust results
Before the market open, Shopify reported its second-quarter results, and shareholders let out a collective cheer. The company reported revenue of $3.58 billion, up 34% year over year, which resulted in adjusted earnings per share (EPS) of $0.42.
To give the results context, analysts' consensus estimates called for revenue of $3.45 billion and EPS of $0.40 -- so Shopify cleared both hurdles with room to spare.
The strong top-line growth was fueled by a 32% increase in gross merchandise volume (GMV), or the total value of products sold on its platform. At the same time, monthly recurring revenue (MRR) of $221 million climbed 19%.
This adds to Shopify's strong operational base, which commands 14% of the U.S. e-commerce market, with further penetration expected. The company also serves millions of merchants in more than 175 countries.
NASDAQ: SHOP
Key Data Points
President Harley Finkelstein commented on the results, saying, "This was a monster quarter: more than 30% growth in GMV AND revenue AND gross profit AND free cash flow. We power every kind of business, and with AI, we're expanding what's possible for all of them. No one else comes close."
For the upcoming third quarter, Shopify is forecasting revenue growth in the low-thirties percentage rate year over year, accompanied by gross profit in the mid-to-high twenties and a free cash flow margin in the high-teens to low-twenties.
Over the past year or so, investors have wrestled with the narrative that AI will eliminate the need for SaaS stocks, but that view is proving to be overly simplistic. Shopify has embraced AI and embedded the technology into a host of tools that will be difficult for general-purpose AI to replicate, as evidenced by the company's robust results.
Shopify has never been cheap, and at 142 times earnings, the stock won't be for everyone. However, it's worth noting that that's a significant discount to its three-year average multiple of 178.
