Shopify on Tuesday reported fourth-quarter earnings and revenue that topped analyst estimates as its merchant business turned in a strong quarter. But SHOP stock fell sharply as analysts mulled the e-commerce firm's 2024 guidance.
Released before the market open, Shopify earnings for the quarter ending Dec. 31 were 34 cents, excluding one-time items. Also, the Canada-based company's revenue rose 24% to $2.1 billion.
SHOP Stock: Free Cash Flow Outlook
Analysts polled by Visible Alpha expected Shopify to report a profit of 30 cents a share on revenue of $2.07 billion.
"In our view, the main item pressuring the stock is the lower-than-expected, free cash flow guidance," said William Blair analyst Matthew Pfau in a report. "Investors were likely not expecting such a significant decrease in FCF margin from the fourth quarter to the first quarter of 2024 (21% to high single digits). The main driver of the lower-than-anticipated FCF guidance is increased investment in performance marketing and point of sale (retail check-out)."
At Jefferies, analyst Samad Samana has a different view. "Q4 operating margin missed consensus by 10 basis points," said Samana in a report. "The Q1 2024 growth outlook was strong, but the operating guidance may limit some enthusiasm. Overall, 4Q delivered versus high expectations, but the valuation and lack of margin upside may keep the stock from pushing higher today."
SHOP stock tumbled 13.4% to close at 77.18 on the stock market today. Heading into the Shopify earnings report, shares were up 15% in 2024, including a 9.4% jump last week.
At Evercore ISI, analyst Mark Mahaney in a report said investors in Shopify stock may need to be patient.
"We believe the company has identified new opportunities/efficiencies and is choosing to lean into them," he said.
Shopify Stock: 2024 Outlook
Shopify said Q4 gross merchandise volume from merchant transactions rose 23% to $75.1 billion vs. estimates of $71.53 billion. Merchant solutions revenue rose 21% to $1.6 billion vs. estimates of $1.57 billion.
For full-year 2024, the company expects "revenue to grow at a low-twenties percentage rate on a year-over-year basis, which translates into a year-over-year growth rate in the mid-to-high-twenties when adjusting for the 500 to 600 basis points impact from the sale of our logistics businesses." Analysts forecast revenue of $8.38 billion, up 19%.
The company in 2023 sold its delivery and logistics business to Flexport, easing Wall Street worries over rising capital spending.
Shopify sets up e-commerce websites for small businesses, and partners with others to handle digital payments and shipping.
Meanwhile, Shopify stock holds a Relative Strength Rating of 95 out of a best-possible 99, according to IBD Stock Check-up.
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