Shopify’s Glowing Earnings Come Amid Shortseller’s Doubts

(Bloomberg) — Shopify Inc. continued its winning streak, beating analysts’ revenue estimates for the tenth quarter in a row and boosting its forecast for the year. But the company was still under the shadow of a report by a renowned shortseller that questioned its sustainability.

The Canadian e-commerce platform had $171.5 million in sales in the quarter ending Sept. 30, topping the average analyst projection of $166.5 million. Shopify also reported adjusted earnings per share of 5 cents, beating estimates for a loss of 2 cents and achieving operating profitability earlier than the company had forecast.

The third-quarter earnings report Tuesday came after an attack by short-selling firm Citron Research that called the company a “get-rich-quick” scheme and said Shopify’s growth is an illusion because so many of its users leave the platform each month. At some point, the company will run out of new users to sign-up and growth will end abruptly, Citron founder Andrew Left argued. Shopify Chief Executive Officer Tobi Lutke has called Left a “troll” and Wall Street analysts have so far almost unanimously stood with the company, but Shopify still hasn’t released new numbers to shore up its argument that growth is sustainable.

Shopify, based in Ottawa, has been the best performing stock on Canada’s benchmark equity index this year, gaining 155 percent. The shares were volatile in early trading, initially dropping almost 5 percent before recovering and gaining as much as 4 percent. The stock was hovering little changed ahead of the company’s earnings call at 8:30 a.m. in New York.

“These are good numbers in our view,” said  Kevin Krishnaratne, an analyst at Paradigm Capital said. “We would be buying the stock on any weakness.”

Lutke is expected to address the Citron assertions on the earnings call.

Shopify provides tools for merchants to sell online through their own websites and multiple third-party marketplaces including Inc. and EBay Inc. Its growth comes amid a shift towards online retail spending as brick-and-mortar sales decline. Shopify is also adding new revenue streams, like loans to customers to help them grow, and poaching bigger, more established customers from competitors like privately-held Magento.