A month has gone by since the last earnings report for Shopify (SHOP Quick QuoteSHOP - Free Report) . Shares have lost about 0.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Shopify due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Shopify Q4 Earnings Beat Estimates, Revenues Up Y/Y

Shopify reported fourth-quarter 2021 non-GAAP earnings of $1.36 per share, which beat the Zacks Consensus Estimate by 2.26%. However, the bottom line declined 13.9% year over year.

Total revenues surged 41% year over year to $1.38 billion, which surpassed the Zacks Consensus Estimate by 2.79%. The top line benefited from strong growth witnessed in Subscription Solutions and Merchant Solutions revenues.

Quarter in Detail

Subscription Solutions revenues surged 26% year over year to $351.2 million, driven by the addition of new merchants.

As of Dec 31, 2021, Merchant recurring revenues grew 23% year over year to $102 million. The growth can be attributed to more merchants joining the platform and an increase in the number of retail locations using POS Pro.

Merchant Solutions revenues climbed 47% to $1.03 billion, primarily due to growth in Gross Merchandise Volume (GMV) that improved 31% year over year to $54.1 billion.

The high level of fourth-quarter GMV was owing to the Black Friday and Cyber Monday shopping season.

Gross Payments Volume (GPV) was $27.7 billion, constituting 51% of GMV processed in the fourth quarter compared with $19.1 billion (46% of GMV) in the year-ago quarter.

Growth in Merchant sales was led by Shopify Payments, Shopify Capital and revenue shares from partners.

Adjusted Operating income for the fourth quarter was $130.2 million compared with $200 million reported in the year-ago quarter.

Balance Sheet

As of Dec 31, 2021, Shopify ended the reported quarter with cash, cash equivalents and marketable securities balance of $7.77 billion compared with $7.52 billion as of Sep 30, 2021.

Guidance

For 2022, Shopify expects Subscription Solutions revenues to be driven by more merchants joining the platform as the company is aggressively investing in sales and marketing.

Merchant Solutions revenues are expected to grow at twice the rate of subscription solution revenues, courtesy of aggressive global expansion and the launch of new features like Shopify Markets.

The company expects year-over-year revenue growth to be lower in the first quarter of 2022 due to a decline in COVID-19 triggered e-commerce boom and new terms with apps and themes developers.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -163.91% due to these changes.

VGM Scores

Currently, Shopify has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Shopify has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.