Sometimes good is just not good enough. Or that seemed to be the investor sentiment following Shopify’s (SHOP) latest quarterly results.
The e-commerce platform hit all the right notes in 4Q20, building on the year’s coronavirus driven tailwinds, and posting both top and bottom-line beats. However, investors were left disappointed by the company’s lack of a clearly defined outlook.
In the quarter, Shopify reported revenue of $977.74 million, amounting to a 93.6% year-over-year uptick and coming in ahead of the Street’s forecast by $64.42 million. Additionally, Non-GAAP EPS of $1.58 beat the estimates by $0.37.
Underpinning the strong growth were excellent showings across a variety of metrics.
Subscription solutions revenue increased by 53% year-over-year to reach $279 million, while monthly recurring revenue (MRR) was also up by 53%, landing at $83 million. Possibly the highlight, was the 117% revenue growth for merchant solutions, which came in at $698 million, pushed ahead by the $41 billion of gross merchandise volume – a 99% year-over-year surge.
However, the company refrained from providing specific quarterly or full-year guidance, although management expects robust, yet decelerating growth compared to last year’s covid-driven growth trends.
Investors evidently focused on the lack of specific guidance, as shares trended south in the subsequent session. However, Baird analyst Colin Sebastian sees much to support on-going momentum.
“We continue to like Shopify given the enormous long-term growth and monetization opportunities as the leading e-commerce platform for merchants and brands,” said the 5-star analyst. “Moreover, the company’s ongoing rapid pace of innovation is helping drive an upswing in entrepreneurship, with plenty of additional products and services in the medium-term pipeline, across retail, payments, marketing, and back office features and functionality.”
Sebastian, therefore, tells investors to see beyond the “decelerating growth rates” and investment-driven lower profit margins, as Shopify is “poised for many years of strong growth ahead.”
Accordingly, Sebastian’s confidence in the rising e-commerce giant is conveyed by a raise to his SHOP price target, which shifts from $1,250 to $1,600. Investors are looking at upside of 28% from current levels. (To watch Sebastian’s track record, click here)
Not all are quite as bullish, and the Street is fairly split when considering Shopify’s prospects. Based on 13 Buys 13 Holds, and a single Sell, the analyst consensus rates the stock a Moderate Buy. After the company’s impressive 12 months share haul (up by 155%), some appear to feel the stock has surged enough for now; at $1,328.36, the average price target suggests a modest 6% upside. (See SHOP stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
