- Shopify beat Q4 earnings and revenue expectations but provided light guidance for Q1, sending the stock down 10%.
- Q4 results benefited from 23% gross merchandise volume growth to $7.51B, but Q1 revenue growth outlook was only in the low 20s%.
- Q1 operating income guidance of $178M was well below the $382M analysts expected, disappointing investors concerned about slowing growth.
Shopify, the Canadian e-commerce company, reported fourth-quarter results that beat expectations but gave mixed guidance for the next quarter. The stock fell around 10% in early trading as investors reacted to the light forecast.
Q4 Financial Results
Shopify’s fourth-quarter earnings and revenue came in ahead of analyst estimates:
- Earnings per share: $0.34 adjusted vs. $0.31 expected
- Revenue: $2.14 billion vs. $2.08 billion expected
The company benefited from more products being sold on its platform, with gross merchandise volume up 23% to $7.51 billion.
However, Shopify’s outlook for the first quarter worried investors. The company projected free cash flow margin in the high single digits, below the 13.6% Wall Street expected. Shopify also called for Q1 revenue growth in the low 20s percent range, implying adjusted operating income well below consensus.
Q1 Guidance and Reaction
Shopify expects first quarter revenue to increase in the mid- to high-20s percent range year-over-year after adjusting for the sale of its logistics business.
But the company’s guidance suggests Q1 adjusted operating income of $178 million, while Wall Street projected $382 million. Wedbush analysts said this outlook was the main reason behind the stock’s decline.
Shopify posted net income of $657 million, or $0.51 per share, in Q4 compared to a net loss of $623 million, or $0.49 per share loss, in the year-ago quarter.
Conclusion
While Shopify’s fourth-quarter results topped expectations, shares fell due to disappointing guidance for Q1 operating income. Investors are concerned about slowing growth as the company faces tough e-commerce comparisons to pandemic-boosted periods.
