Shopify Inc. (NYSE: SHOP) released its fiscal Q4 and full-year 2021 earnings and revenue results on Wednesday, February 16, 2022. The company topped earnings and revenue estimates during the quarter.
What to look for: Revenue, earnings and gross merchandise volume topped analyst estimates. However, management indicated that marketing investments for the stock could rise this year to boost merchant customer growth and capital spending growth. The enhanced investments come as the pandemic slows and e-commerce growth stabilizes. In addition, the company is constructing a distribution network in the US to store and ship products to merchants. Management indicated that it would increase Shopify Fulfilment Network investments.
Earnings: Stockearning’s estimated EPS for fiscal Q4 2021 was expected to be $1.30 per share, but the company reported EPS of $1.36 on an adjusted basis, a 14% drop from a year ago. In the third quarter, the company reported earnings that missed estimates by 70.21%, reporting actual EPS of $0.14 versus Estimated EPS of $0.47. Historical EPS shows that the company has, in the past 12 quarters, topped estimates 11 times (91%) and missed once (8%). For full fiscal 2021, the company had adjusted earnings of $6.41 per share, beating estimates of $6.35 per share.
Revenue: Shopify reported $1.38 billion in Q4 2021, topping analysts expectations of $1.34 billion and growing sales 41% YoY. For the whole year, the company topped expectations with sales of $4.6 billion versus estimates of $4.573 billion. The company expects revenue to be lower in the first quarter of fiscal 2022 and highest in the fourth quarter.
Stock movement: SHOP shares have dropped 34.6% since its third-quarter earnings. Interestingly, the company's shares have been UP 18 times out of the past 26 quarters. So, the historical price reaction suggests a 69% probability of the share price going UP following the fiscal Q4 2021 earnings release. According to the Stockearning algorithm, the predicted first-day move is +/-6%, while the predicted move on the seventh day is +/-7%.
What analysts are saying: Oppenheimer analyst Brian Schwartz slashed his price target on SHOP from $1,350 to $960 but maintained a Buy rating in the stock. Schwartz feels Shopify has a clear route forward to monetize its committed and expanding customer base fully. In a research note, the analyst told investors that the company's Q4 was defined by robust growth, take rate inflation, and positive remarks on the business dynamics. Additionally, 2022 is gearing up to be a back-end-heavy year with a lower operating margin, which the analyst believes might drag the stock in the short term, given the company's slowing growth.
Piper Sandler analyst Brent Bracelin also slashed his price target on the stock from $1,400 to $900 but maintained a Buy rating on the shares. The revision came after Shopify reported what the analyst termed a "solid beat" in the fourth quarter but growth moderated with the company indicating that this year marks the start of a new investment cycle. Shopify plans to increase both capital and operating expenses through 2024, owing in part to its plan to expand quite assertively into fulfilment services, according to Bracelin, who believes the gross margin impacts and high short-term implementation challenges might transform how growth investors appreciate the stock.
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