What Happened?
Shares of e-commerce software platform Shopify (NYSE:SHOP) jumped 4.1% in the afternoon session after the company reported impressive fourth-quarter results that exceeded analysts' gross merchandise volume expectations, leading to a solid sales beat. The improved top-line growth was driven by growth with existing customers and their businesses, better payment monetization, and strength in Europe. The result reflected the growing adoption of products like Shopify Pay and Shopify Plus, which can also drive higher revenue per customer and higher customer retention over the long term. Notably, Shopify payments GMV grew 35% y/y while Shop app native GMV rose 84% y/y. Operating profit and and adjusted EPS also beat expectations, indicating a healthy balance of growth and profits.
Looking ahead, revenue guidance for the next quarter revealed growth is expected to remain strong in the mid-20s percentage range. While this was only in line with Wall Street's expectations, it seems the market was willing to reward the strong quarter and overlook the guide that didn't beat convincingly. We've seen that for some SaaS stocks trading at premium multiples, an in-line guide sank shares. Overall, this was an impressive quarter.
The shares closed the day at $123.59, up 3.1% from previous close.
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What The Market Is Telling Us
Shopify’s shares are quite volatile and have had 16 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 25.7% on the news that the company reported impressive third-quarter financial results. GMV (gross merchandise value) exceeded analysts' expectations, enabling it to beat Wall Street's revenue estimates and provide Q4 revenue guidance that came in higher than anticipated. On top of that, its revenue growth accelerated, and it produced a 19.5% free cash flow margin, showing that it can balance growth and profits. Overall, we think this was a solid quarter that revealed improved growth momentum.
Shopify is up 15% since the beginning of the year, and at $123.71 per share, has set a new 52-week high. Investors who bought $1,000 worth of Shopify’s shares 5 years ago would now be looking at an investment worth $2,511.
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