Shopify (SHOP) Down After Earnings on Lightish Margin Guidance
Shares of Shopify (SHOP) are giving up last week’s gains (plus a little) today after the company reported Q4 results before the market opened. Revenue growth of 24.5% to $2.16 billion was solid (beat by 3.7%) as was Gross Merchandise Value (GMV) growth of 23% (roughly 10 points faster than broad eCommerce growth) and adjusted EPS of $0.34 ($0.04 better than expected).
The apparent fly in the ointment was higher operating expenses (thanks performance marketing), which is now set to climb by 13% in Q1, well ahead of the 4%-ish growth analysts had expected. While this seems rather nitpicky it’s an “issue” because one of the characteristics analysts are looking for out of the new and improved Shopify (now that it’s sold the money-draining logistics business) is profitable growth. While one can argue that ongoing investments for what’s arguably the best company in eCommerce (and one that’s also grabbing market share) is a pretty smart move (if not table stakes) the point is the bar was set high going into earnings and SHOP’s guidance came up just a bit short. Analysts are trimming their EPS estimates for 2024 by a few pennies as a result.
That all said, Shopify is still expected to grow revenue in the high teens (maybe even 20%) in 2024 and EPS is set to grow north of 40%. So at the end of the day, whether it’s $1.02, $1.06 or $1.10, the point is there’s nothing really “wrong” here.
I don’t see anything that cracks the underlying growth story. My only real concern is that the market might not be as friendly to imperfect growth stocks if Fed speakers keep squawking about “higher for longer” and yields keep going up. That’s macro stuff, not SHOP stuff.
Taking a step back, we’re up a little more than 20% on SHOP and will keep at hold. HOLD
