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Why Is Shopify (SHOP) Down 0.5% Since Last Earnings Report?
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It has been about a month since the last earnings report for Shopify (SHOP - Free Report) . Shares have lost about 0.5% in that time frame, outperforming 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 2022 adjusted earnings of 7 cents per share, comfortably beating the Zacks Consensus Estimate of breakeven but declining 50% year over year.
Total revenues increased 25.7% year over year to $1.74 billion, which beat the Zacks Consensus Estimate by 5.57%.
Quarter in Detail
Subscription Solutions revenues climbed 14% year over year to $400.3 million primarily due to more merchants joining the platform, as well as higher variable platform fees and apps.
Merchant Solutions revenues improved 29.7% year over year to $1.33 billion, driven by strong Gross Merchandise Volume (GMV), which improved 13% year over year to $61 billion.
As of Dec 31, 2022, Monthly Recurring Revenues (MRR) were $109.5 million, up 7% from the year-ago quarter. Growth benefited from more merchants joining the platform and an increase in the number of retail locations using POS Pro.
Shopify Plus revenues were $36.6 million, representing 33% of MRR compared with 29% reported in the year-ago quarter.
Gross Payments Volume grew to $34.2 billion, constituting 56% of GMV processed in the fourth quarter compared with $27.7 billion (51% of GMV) in the year-ago quarter.
Shopify Capital advanced $393.2 million in cash and loans to merchants in the United States, Canada, the U.K. and Australia in the reported quarter, up 21% year over year. Since the launch of Shopify Capital, cumulative merchant cash advances have risen to $4.7 billion, out of which $580.1 million was outstanding as of Dec 31, 2022.
Operating Details
Non-GAAP gross profit increased 16.9% year over year to $818.8 million. However, the gross margin contracted 360 basis points (bps) year over year to 47.2%.
Adjusted sales and marketing expenses, as a percentage of revenues, declined 280 bps year over year to 16.2%. Moreover, adjusted research and development expenses, as a percentage of revenues, increased 500 bps year over year to 19.4%. Adjusted general and administrative expenses increased 10 bps to 6.1%.
Non-GAAP operating expenses increased 32.9% year over year to $757.9 million. Operating expenses, as a percentage of revenues, increased 230 bps to 43.7%.
Shopify’s adjusted operating income declined 53.1% year over year to $61 million.
Balance Sheet
As of Dec 31, 2022, Shopify ended the reported quarter with cash, cash equivalents and marketable securities balance of $5.05 billion compared with $4.9 billion as of Sep 30, 2022.
Guidance
For the first quarter of 2023, Shopify expects revenue growth in the high-teen percentages on a year-over-year basis.
The gross margin is expected to be slightly higher than Shopify’s fourth-quarter 2022 gross margin.
Operating expenses are expected to grow in the low-single-digit percentages on a sequential basis.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
VGM Scores
Currently, Shopify has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Shopify has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Shopify belongs to the Zacks Internet - Services industry. Another stock from the same industry, Alphabet Inc. (GOOG - Free Report) , has gained 5.5% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.
Alphabet Inc. reported revenues of $63.12 billion in the last reported quarter, representing a year-over-year change of +2%. EPS of $1.05 for the same period compares with $1.53 a year ago.
Alphabet Inc. is expected to post earnings of $1.09 per share for the current quarter, representing a year-over-year change of -11.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Alphabet Inc. Also, the stock has a VGM Score of C.
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Why Is Shopify (SHOP) Down 0.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Shopify (SHOP - Free Report) . Shares have lost about 0.5% in that time frame, outperforming 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 2022 adjusted earnings of 7 cents per share, comfortably beating the Zacks Consensus Estimate of breakeven but declining 50% year over year.
Total revenues increased 25.7% year over year to $1.74 billion, which beat the Zacks Consensus Estimate by 5.57%.
Quarter in Detail
Subscription Solutions revenues climbed 14% year over year to $400.3 million primarily due to more merchants joining the platform, as well as higher variable platform fees and apps.
Merchant Solutions revenues improved 29.7% year over year to $1.33 billion, driven by strong Gross Merchandise Volume (GMV), which improved 13% year over year to $61 billion.
As of Dec 31, 2022, Monthly Recurring Revenues (MRR) were $109.5 million, up 7% from the year-ago quarter. Growth benefited from more merchants joining the platform and an increase in the number of retail locations using POS Pro.
Shopify Plus revenues were $36.6 million, representing 33% of MRR compared with 29% reported in the year-ago quarter.
Gross Payments Volume grew to $34.2 billion, constituting 56% of GMV processed in the fourth quarter compared with $27.7 billion (51% of GMV) in the year-ago quarter.
Shopify Capital advanced $393.2 million in cash and loans to merchants in the United States, Canada, the U.K. and Australia in the reported quarter, up 21% year over year. Since the launch of Shopify Capital, cumulative merchant cash advances have risen to $4.7 billion, out of which $580.1 million was outstanding as of Dec 31, 2022.
Operating Details
Non-GAAP gross profit increased 16.9% year over year to $818.8 million. However, the gross margin contracted 360 basis points (bps) year over year to 47.2%.
Adjusted sales and marketing expenses, as a percentage of revenues, declined 280 bps year over year to 16.2%. Moreover, adjusted research and development expenses, as a percentage of revenues, increased 500 bps year over year to 19.4%. Adjusted general and administrative expenses increased 10 bps to 6.1%.
Non-GAAP operating expenses increased 32.9% year over year to $757.9 million. Operating expenses, as a percentage of revenues, increased 230 bps to 43.7%.
Shopify’s adjusted operating income declined 53.1% year over year to $61 million.
Balance Sheet
As of Dec 31, 2022, Shopify ended the reported quarter with cash, cash equivalents and marketable securities balance of $5.05 billion compared with $4.9 billion as of Sep 30, 2022.
Guidance
For the first quarter of 2023, Shopify expects revenue growth in the high-teen percentages on a year-over-year basis.
The gross margin is expected to be slightly higher than Shopify’s fourth-quarter 2022 gross margin.
Operating expenses are expected to grow in the low-single-digit percentages on a sequential basis.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
VGM Scores
Currently, Shopify has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Shopify has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Shopify belongs to the Zacks Internet - Services industry. Another stock from the same industry, Alphabet Inc. (GOOG - Free Report) , has gained 5.5% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.
Alphabet Inc. reported revenues of $63.12 billion in the last reported quarter, representing a year-over-year change of +2%. EPS of $1.05 for the same period compares with $1.53 a year ago.
Alphabet Inc. is expected to post earnings of $1.09 per share for the current quarter, representing a year-over-year change of -11.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Alphabet Inc. Also, the stock has a VGM Score of C.