Shopify Posts Solid Q4, Analysts Expect Further Market Share Gains

by Priya Nigam Benzinga Staff Writer

Shares of Shopify Inc SHOP tanked in early trading on Wednesday, despite the company reporting a fourth-quarter revenue beat.

Here are some key analyst takeaways.

Piper Sandler analyst Clarke Jeffries reaffirmed a Neutral rating, while raising the price target from $94 to $104.
Goldman Sachs analyst Gabriela Borges reiterated a Buy rating, while lifting the price target from $135 to $150.
JPMorgan analyst Reginald Smith maintained an Overweight rating, while raising the price target from $121 to $124.
Cantor Fitzgerald analyst Deepak Mathivanan reiterated a Neutral rating and price target of $120.

Check out other analyst stock ratings.

Piper Sandler: Shopify's revenues came in at $2.812 billion. It surpasses expectations, with growth accelerating to 31% year-on-year, Jeffries said in a note. Gross merchandise value (GMV) also accelerated to 26% year-on-year and came in at $94.5 billion, beating Street estimate of $92.7 billion.

Management guided to revenue growth in the mid-20s range for the first quarter, with gross profit growth in the low-20s range, the analyst stated. "All great news for Bulls, save for the company’s guarded commentary about near-term profitability expansion: prioritizing investment in key areas with the aim to maintain this level of FCF profitability for the near-term," he further wrote.

Goldman Sachs Shopify's GMV and revenues came in 2% and 3% higher than Street estimates, while its EBIT margin beat expectations by around 50 basis points, Borges said. Management guided to revenue growth in mid-20% year-on-year for the first quarter, versus consensus of 25%, she added.

Shopify continues to make progress in the enterprise segment, which could be "a key growth driver" this year, the analyst stated. The company's GMV growth rate as a percentage of US eCommerce growth continues to climb, "indicating that investments are coming from a position of strength i.e. accelerating market share gains," she further wrote.

JPMorgan: Shopify reported "another solid beat," with accelerating volume and revenue growth and upside to free cash flow margins. The company's "relatively soft" margin guidance for the first quarter does not reflect its longer-term margin expansion opportunity, Smith said.

Although the current momentum is not sustainable in the long term, the analyst wrote. But Shopify can “lean in on discretionary marketing spend" and position itself "extremely well for near-term earnings upside,"

Cantor Fitzgerald: Shopify's GMV growth accelerated by 2 percentage points to 26% year-on-year. That’s "the fastest growth in nearly 12 quarters," Mathivanan said. The implied operating income guidance for the first quarter is around 10% below the Street estimate, "which likely includes SHOP’s usual conservatism," he wrote.

The guidance does trigger some concern around the company's growth and profitability over the next few quarters, the analyst stated. Shopify has "a strong roadmap in several areas, he adds. They include Enterprise, Plus, advertising, and payments – which could keep deceleration modest over next few quarters."

Price Action: Shares of Shopify had declined by 1.93% to $121.21 at the time of publication on Thursday.

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