Shopify pulls back on earnings beat, cautions about decelerating growth

Even its third consecutive quarter of near triple-digit growth wasn’t enough.

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This article was originally published on All figures quoted in US dollars unless otherwise stated.

Shopify Inc (NYSE: SHOP) reported its fourth-quarter earnings before the market open on Wednesday, and even though the e-commerce platform delivered impressive top- and bottom-line results, its guidance left investors wanting for more. The company cautioned that the frantic pace of growth that characterized much of the past year would slow in 2021, giving investors pause.

The company reported revenue of $978 million, up 94% year over year. Adjusted net income of $199 million generated adjusted earnings per share (EPS) that soared 198% to $1.58. This easily surpassed analysts' consensus estimates, which called for revenue of $910 million and adjusted EPS of $1.25. 

There was plenty of stout growth that underpinned Shopify's robust top- and bottom-line performance. Subscription solutions revenue grew an impressive 53% year over year to $279 million, spurred on by monthly recurring revenue (MRR) of $83 million, which was also up 53%.

It was merchant solutions that stole the show, however, with revenue that grew 117% to $698 million. This was driven higher by gross merchandise volume (the value of products that changed hands on Shopify's platform) that soared 99% to $41 billion in the fourth quarter.

While these number all gave investors cause to celebrate, shareholders focused instead on Shopify's guidance, sending the stock lower. The company didn't provide specific numbers for the upcoming quarter or full year, but rather painted broad strokes of how it sees 2021 playing out.

Management noted that growth would be "driven by more merchants ... joining the platform in a number lower than the record in 2020, but higher than any year prior to 2020 ... We expect that we will continue to grow revenue rapidly in 2021, albeit at a lower rate than in 2020." 

Shopify said it will continue to invest "aggressively" to fuel growth.

This article was originally published on All figures quoted in US dollars unless otherwise stated.

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Danny Vena owns shares of Shopify. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Shopify. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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