Monday, July 15, 2024

Shopify Stock Rally Snuffed Out On Weak 2023 Revenue Outlook

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E-commerce firm Shopify (SHOP) reported earnings and revenue for the fourth quarter that topped analyst estimates. But Shopify stock plummeted Thursday as the company’s March quarter revenue outlook fell short of expectations.

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The company reported December-quarter earnings after the market close on Wednesday.

For the period ended Dec. 31, Canada-based Shopify said it earned 7 cents per share on an adjusted basis, down 50% from a year earlier. Also, revenue for Shopify stock rose 26% to $1.7 billion, the company said.

Analysts expected the Shopify earnings report to record a loss of 1 cent on revenue of $1.65 billion. A year earlier, Shopify earned 14 cents per share on revenue of $1.38 billion.

Shopify stock plunged 14.1% to 45.87  in morning trades on the stock market today. In Wednesday’s regular session, shares rose 6.5%.

Shopify Stock: ‘High Teens’ Revenue Growth

For the first quarter of 2023, the company predicted revenue growth in the “high teens.” Analysts had projected more than 20% revenue growth.

“We believe that the revenue guide implies that Q1 gross merchandise volume will be weaker than expected,” Jefferies analyst Samad Samana said in a note to clients. “Management did note the uncertain macro (economy) was factored into the outlook.”

At RBC Capital, analyst Paul Treiber said in his note: “Guidance implies a return to negative EPS (we estimate a 5-cent loss), falling short of consensus at zero cent profit. Although Q1 guidance below consensus may reflect conservatism, the lack of annual guidance suggests limited near-term visibility to the sustainability of consumer spending.”

And UBS analyst Kunal Madhukar said in his report to clients: “We are incrementally more negative on SHOP post earnings given virtually flat merchant count year-over-year which the company will no longer disclose.”

New Chief Financial Officer

After plunging in 2022, Shopify stock had advanced 44% this year.

Barclays analyst Trevor Young said in a note: “Many investors had been expecting more explicit 2023 commentary on operating income profitability, which we didn’t get. A strong Q4 print does appear to be overshadowed by these 2023 outlook disappointments, but we think there’s a combination of conservatism and a bit of a reset on expectations by the new CFO in his first print in the role.”

Shopify in January hiked contract prices for merchants.

Shopify sets up e-commerce websites for small businesses, and partners with others to handle digital payments and shipping. Further, the company is building a U.S. distribution network to store and ship products for its merchant customers.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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