Shopify down 15% despite strong results: why is it being punished?


Shopify Inc (NYSE: SHOP) on Wednesday said its profit and revenue topped Wall Street estimates in the fiscal fourth quarter. Shares still slid more than 15% on dovish guidance for the first half of 2022.

Important points in Shopify’s Q4 report

Shopify reported $371 .3 million in net loss ($2.95 a share) for Q4. In comparison, it had posted $123.9 million in net income (99 cents a share) last year. On an adjusted basis, the eCommerce giant earned $1.36 a share, as per the earnings press release.

The Canadian multinational generated $1.38 billion in revenue – a 41% YoY increase. According to FactSet, experts had forecast $1.30 of adjusted EPS on $1.34 billion in revenue. At $54.1 billion, gross merchandise volume topped expectations but more than a billion dollars.

Shopify attributed its strong fourth-quarter results partially to the holiday season. Revenue was up 47% and 26% from merchant and subscription solutions, respectively. Including today’s price action, the stock is now down 45% year-to-date.

Shopify expects a slowdown in H1 of 2022

Shopify benefitted greatly from the COVID-driven acceleration in eCommerce. Harley Finkelstein – the president of Shopify, said:

The last two years have been extraordinary. We nearly tripled revenue, more than doubled GMV and the Shopify team, and the number of merchants using Shopify is nearly twice as big as 2019 levels.

The NYSE-listed company, however, says the same won’t repeat in H1 of 2022 and expects revenue growth to be the slowest in fiscal Q1. Shopify forecasts its revenue to grow by less than fiscal 2021’s 57% this year.

Much like any other company, Shopify sees inflationary pressures as a headwind for 2022 as well. The online retailer started the calendar 2022 with $7.77 billion in cash and equivalents. Finkelstein added:

We’re emerging from the sprint of last two years even stronger and more ambitious, since accelerated leap into digital commerce means we can go farther faster. We head into 2022 energised by what we can build with unique combination of merchants, ecosystem, and top talent we have today.

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