Shopify (SHOP) closed at a record $179.22 on Oct. 12 but now trades about 12% below that level, including a roughly 6% drop on Friday. The e-commerce software company reports third-quarter results before the market opens on Nov. 3, after management set guidance in August for revenue growth in the low thirties, gross profit growth in the mid-to-high 20s and a free cash flow margin in the high teens to low 20s. The author notes Shopify has met or beaten its guidance all year, with revenue growth of 34% in both the first and second quarters, though the third quarter faces a tougher comparison. Shares fell about 16% on May 5 even though first-quarter revenue growth beat the outlook, and rose about 17% after the August report, suggesting investors judge more than guidance beats. At roughly 86 times trailing free cash flow, the author argues the drop does not change much and prefers to wait for the report and see where shares settle afterward.
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