Why Shopify, Inc. Stock Climbed 11% Last Month

What happened

Shares of Shopify, Inc. (NYSE: SHOP) were moving higher in May as the cloud-based e-commerce specialist turned in a solid first-quarter earnings report and investors reacted to an acquisition by a rival. According to data from S&P Global Market Intelligence, shares finished the month up 11%.

As the chart below shows, the stock’s performance was an erratic at times, but investor enthusiasm for the stock, which has surged in recent years, seemed to win out.

SHOP data by YCharts.

So what

Shopify shares actually dove to start the month as investors initially reacted poorly to the software maker’s first-quarter earnings report. The stock fell 4.4% on May 1 as the report came out, though it more than recovered those losses two days later.

Image source: Shopify.

In the quarter, Shopify posted another round of strong top-line growth as revenue jumped 68% to $214.3 million, beating estimates at $202 million; however, investors may have expected that as the company has a pattern of issuing conservative guidance. Merchant Solutions, which is made up of add-on features like payment processing and transaction fees, outgrew Subscription Solutions and made up more than half of the quarter’s revenue. On the bottom line, the company posted an adjusted earnings per share of $0.04, up from a loss of $0.04 the year before, which also beat estimates of a $0.05 loss.

Later in the month, Shopify shares momentarily dipped on May 22 after Adobe Systems (NASDAQ: ADBE) said it would acquire Shopify rival Magento for $1.68 billion; however, the stock recovered the 4% loss that day over the duration of the month as Shopify is significantly larger than Magento.

Now what

Shopify lifted its full-year guidance to revenue of $1 billion to $1.01 billion, representing 49% growth, and adjusted operating profit of $0 to $5 million. For the current quarter, the company sees revenue of $230 million to $235 million and an adjusted operating loss of $5 million to $7 million.

Considering the opportunity ahead for Shopify, it’s going to take more than a rival acquisition or a mixed earnings report to sink the stock — at least as long as the economy is strong and the market is up.

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Jeremy Bowman owns shares of Shopify. The Motley Fool owns shares of and recommends Adobe Systems and Shopify. The Motley Fool has a disclosure policy.

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