Why Shopify stock soared 54% in November

stock Shopify (store 1.43%) Shares rose higher in November after the Canadian e-commerce software company reported strong third-quarter results and impressive sales over the key Black Friday weekend, helped by improving macroeconomic data.

The stock is up 54% in the month, according to data from S&P Global Market Intelligence. The stock jumped earlier this month on its earnings report and has continued to rise since.

^SPX data from YCharts

Shopify wows you with the end result

Shopify shares surged 22% on Nov. 2 after beating top and bottom line estimates, regaining some of the momentum it seemed to have lost as the economy reopened after the pandemic.

Gross merchandise volume (GMV) increased 22% to $56.2 billion and revenue increased 25% to $1.71 billion, beating estimates of $1.67 billion. Adjusting for the sale of its logistics business, sales increased 30% for the quarter.

But the real surprise was in the bottom line, as the company improved margins overall, thanks in part to selling off its logistics business. Gross profit increased 36% to $901 million, and gross margin increased from 48.5% to 52.6%. All three operating expense items decreased from the year-ago quarter, and generally accepted accounting principles (GAAP) operating income was reported at $122 million, compared to a loss of $346 million in the year-ago quarter. It’s possible.

All in all, the company earned $555 million in unrealized gains on its shares, including its recent IPO. KlaviyoEarnings per share were $0.55, well above the $0.15 consensus.

For the rest of the month, Shopify rose as the overall market rose, and investors began to believe that the Federal Reserve was done raising interest rates and might soon cut rates further. The stock surged another 5% on November 27, with GMV reported at $9.3 billion over the Black Friday/Cyber ​​Monday weekend. This is a 24% increase from a year ago.

Can Shopify continue to rise higher?

Shopify’s guidance for the remainder of the year also pleased the market, predicting revenue growth in the low teens and saying operating expenses would decline to low single digits starting in the third quarter. This suggests strong earnings performance in the fourth quarter. This was Shopify’s strongest seasonally quarter yet.

Shopify stock is expensive, but the company is showing potential for margin expansion and delivering rapid revenue growth. This will push stocks higher in the long run.