OTTAWA, Canada – Shopify reported strong fourth-quarter earnings, surpassing analyst estimates, and seeing a significant increase in its merchant business. However, despite the positive results, the company’s stock plummeted as analysts scrutinized its 2024 guidance.
The company’s earnings for the quarter ending Dec. 31 came in at 34 cents per share, excluding one-time items. Additionally, Shopify’s revenue rose by 24% to $2.1 billion, exceeding the expectations of analysts.
While the operating margin for Q4 missed consensus by 10 basis points, the growth outlook for Q1 2024 was promising. However, the operating guidance provided by the company may limit investor enthusiasm.
As a result of the earnings report, Shopify’s stock fell by 8.4% in early trading. Leading up to the report, the company’s shares had seen a 15% increase in 2024, including a 9.4% jump the previous week.
In its 2024 outlook, Shopify revealed that its gross merchandise volume from merchant transactions had risen by 23% to $75.1 billion, exceeding estimates. Additionally, merchant solutions revenue increased by 21% to $1.6 billion, further surpassing expectations.
Looking ahead to the full year 2024, the company anticipates revenue to grow at a low-twenties percentage rate on a year-over-year basis. However, after adjusting for the impact from the sale of its logistics businesses, this translates into a mid-to-high-twenties year-over-year growth rate. It’s worth noting that the company sold its delivery and logistics business in 2023, which alleviated concerns about rising capital spending among Wall Street analysts.
Shopify specializes in setting up e-commerce websites for small businesses and partnering with others to handle digital payments and shipping.
Despite the stock’s sharp decline following the earnings report, Shopify’s stock still holds a Relative Strength Rating of 95 out of a possible 99 based on IBD Stock Check-up.
As investors assess the company’s performance and outlook, it remains to be seen how Shopify will navigate the challenges and opportunities in the e-commerce industry in the year ahead.