Shopify disappoints Wall Street despite Q4 earnings beat
Shopify (SHOP) stock is under pressure, despite beating fourth-quarter earnings estimates while its outlook did not impress Wall Street. Even while outpacing top and bottom line expectations, what will companies like Shopify need to do to appease analyst forecasts?
D.A. Davidson Managing Director Gil Luria joins Yahoo Finance Live to discuss the changing expectations of Wall Street and how Shopify may hold up.
“Where the stock is right now, is where it was a week ago,” Luria says, noting that Shopify's 2023 achievements will not be replicated in 2024. Luria states Shopify's growth "has a lot of layers" due to alterations to its business model.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Eyek Ntekim
Video Transcript
- Shopify beat analyst expectations in its fourth quarter with revenue of $2.14 billion and adjusted earnings per share of $0.34. But the stock is under pressure this morning, down about 8.5%, as its outlook failed to impress the street. We have Gil Luria, DA Davidson managing director with us for more. So, we have seen that some of these companies still not getting rewarded for their beats here. So when you have a company like Shopify disappointing, then, what are your big takeaways?
GIL LURIA: Well, this is really one of those situations where expectations were so high coming into the quarter that there really wasn't much way that they could meet them. The stock is up 10% just a week-- from a week ago, meaning where the stock is right now is where it was a week ago as people expected them to deliver another fantastic result. Now they did. The fourth quarter was as impressive as it can be in the sense they grew 30% if you exclude the logistics business they spun off while reducing expenses by 22% over last year. That's an incredible feat, it's just that they can't replicate that in 2024, and that's why the stock's pulling back now.
They will grow very fast this year. They'll grow margins and profitability as well, just not as much as last year.
- I mean, this shifting e-commerce marketplace has certainly been something that they've leaned into and had a great strategy to execute here, Gil. What do they need to do to iterate on top of that now for that next, kind of, inflection point of growth, even though investors seem like they're not satisfied with perhaps enough of that continued acceleration in the growth.
GIL LURIA: Yeah, the Shopify growth story has a lot of layers. The first and foremost, they leverage the growth in e-commerce, the growth in e-commerce is still double-digit growth on a global basis, they're leveraged to that. Beyond that, they've been able to take some price increases last year they'll take more this year in different categories. They're increasing the penetration of the payments product, so they're growing on top of that.
And then they're adding incremental services. B2B services, offline commerce, and more advertising-type services and campaign services. So their growth is going to be above and beyond the growth of e-commerce this year and going forward because they can expand the wallet share of the retailers they're winning over.
