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Why Shopify Inc. Is Down Over 2%

Shopify Inc.  (TSX:SHOP)(NYSE:SHOP), the leading cloud-based, multi-channel commerce platform for small- and medium-sized businesses, released its fiscal 2017 fourth-quarter and full-year earnings results this morning, and its NYSE-listed shares have responded by falling over 2% in pre-market trading. Let’s break down the results to determine if we should consider using this weakness as a long-term buying opportunity.

A phenomenal financial performance

Here’s a quick breakdown of 10 of the most notable statistics from Shopify’s three-month period ended December 31, 2017, compared with the same period in 2016:

Metric Q4 2017 Q4 2016 Change
Subscription solutions revenues US$93.92 million US$56.39 million 66.6%
Merchant solutions revenues US$128.90 million US$74.00 million 74.2%
Total revenues US$222.81 million US$130.38 million 70.9%
Gross profit US$121.52 million US$68.35 million 77.8%
Adjusted operating income (loss) US$11.58 million (US$807,000) >100%
Adjusted net income (loss) US$14.71 million (US$369,000) >100%
Adjusted net income (loss) per share attributable to shareholders US$0.15 US$0.00 >100%
Monthly recurring revenue (MRR) US$29.9 million US$18.5 million 61.6%
Gross merchandise volume (GMV) US$9.1 billion US$5.5 billion 65.5%
Shopify Capital cash advances US$39.7 million US$14.7 million 170.0%

And here’s a quick breakdown of eight notable statistics from Shopify’s 12-month period ended December 31, 2017, compared with the same period in 2016:

Metric Fiscal 2017 Fiscal 2016 Change
Subscription solutions revenues US$310.03 million US$188.61 million 64.4%
Merchant solutions revenues US$363.27 million US$200.72 million 81.0%
Total revenues US$673.30 million US$389.33 million 72.9%
Non-GAAP gross profit US$381.53 million US$210.21 million 81.5%
Adjusted operating income (loss) US$6.05 million (US$12.14 million) >100%
Adjusted net income (loss) US$15.21 million (US$10.33 million) >100%
Adjusted net income (loss) per share attributable to shareholders US$0.16 (US$0.12) >100%
GMV US$26.3 billion US$15.4 billion 70.8%

Outlook on 2018

In the press release, Shopify also provided its outlook on the first quarter and full year of fiscal 2018; here’s a breakdown of what the company expects to accomplish:

Metric Q1 2018 Outlook Fiscal 2018
Total revenues US$198 million to US$202 million US$970 million to US$990 million
GAAP operating loss US$25 million to US$27 million US$95 million to US$105 million
Adjusted operating income (loss) (US$6 million to US$8 million) (US$5 million) to US$5 million

What should you do with Shopify now?

The fourth quarter was outstanding in every way for Shopify, and the results surpassed analysts’ expectations, which called for adjusted EPS of US$0.05 on revenue of US$209.7 billion.

The fourth quarter also capped off a phenomenal year for the company, in which it grew its revenue by over 70% and it swung to a solid adjusted profit, and its outlook calls for very strong growth going forward, so I think the market should have responded by sending its stock significantly higher; that being said, I think any weakness in today’s trading session represents an attractive entry point for long-term investors, because Shopify is one of the best growth stocks in the market today, and because I think its growth will accelerate when recreational cannabis is legalized later this year.

With all of the information provided above in mind, I think all Foolish investors should strongly consider using the post-earnings weakness in Shopify to initiate long-term positions with the intention of adding to those positions on any further weakness in the trading sessions ahead.

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Fool contributor Joseph Solitro has no position in any stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Shopify and SHOPIFY INC. Shopify is a recommendation of Stock Advisor Canada.

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