Shopify (NYSE:SHOP) (TSE:SHOP) shares plunged nearly 10% in the early session today despite the eCommerce platform delivering a better-than-expected set of numbers in the fourth quarter. Revenue surged by 24% year-over-year to $2.14 billion, surpassing expectations by $60 million. Further, EPS of $0.34 landed past estimates by $0.04.
During the quarter, Gross Merchandise Volume (GMV) increased by 23% to $75.1 billion. Further, Gross Payments Volume (GPV) jumped to $45.1 billion from $34.2 billion in the year-ago period. Driven by increased penetration of Shopify Payments, revenue from Merchant Solutions increased by 21% to $1.6 billion. Additionally, pricing gains and an increase in the number of merchants resulted in a 31% increase in Subscription Solutions revenue.
This growth in the company’s subscription plans resulted in its Monthly Recurring Revenue (MRR) rising by 35% to $149 million at the end of the quarter. Importantly, Shopify achieved $905 million in free cash flow for the full year. In comparison, it had experienced a negative free cash flow of $186 million in the prior year.
For the upcoming quarter, Shopify expects revenue growth in the mid-to-high twenties. The gross margin for the quarter is seen expanding by 150 basis points sequentially. At the same time, the eCommerce company anticipates a revenue growth headwind of 500-600 basis points and a gross margin tailwind of 450-500 basis points following the sale of its logistics businesses.
Is SHOP a Good Buy?
Overall, the Street has a Moderate Buy consensus rating on Shopify. Following a nearly 83% jump in the company’s share price over the past year, the average SHOP price target of $81.19 points to a potential downside of 8.9% in the stock.
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