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Shopify Stocks fell Wednesday after the e-commerce software company reported fourth-quarter earnings that narrowly beat expectations, but warned of revenue headwinds in the first half of 2022.
Shares were down 16 percent to $746.99 at 9:52 a.m. Wednesday.
Shopify (stock ticker:
a store) reported adjusted quarterly earnings of $1.36 per share, beating expectations of $1.30, on sales of $1.38 billion, beating expectations of $1.34 billion and up 41 percent from the same quarter in 2020.
Annual revenue of $4.6 billion also beat expectations. The company reported adjusted earnings of $6.41 per share. Analysts expected sales of $4.573 billion, and earnings of $6.35 per share.
“The past two years have been extraordinary,” said Harley Finkelstein, president of Shopify. “We nearly tripled revenue, increased our GMV [gross merchandise volume] And the Shopify team, the number of merchants using Shopify is nearly twice as many as 2019 levels.”
For 2022, the e-commerce company expects annual revenue to be lower in the first quarter and higher in the fourth due to three factors. The company believes that the Covid-19-led acceleration of e-commerce will not repeat itself in the first half of 2022, but it expects some business initiatives and investments to gain momentum throughout the year. Finally, there will be some contract terms that are likely to be headwinds for subscription solutions revenue in the first half of the year, especially the first quarter.
Shopify anticipates that subscription solutions revenue will grow as more merchants join the platform overall, with merchant solutions revenue growing at twice the rate of subscription solutions.
Investors were focused on Shopify’s post-pandemic performance on Wednesday, writes Scott Kessler, global technology leader at Third Bridge.
“People are focusing on two topics related to Shopify and the pandemic,” Kessler wrote in an email. The first is the sustainability of growth and momentum in a world that we all hope will continue to open up. This means that people are leaving their homes and shopping in stores. Can the company achieve average revenue growth of 30% projected for 2022? “
The second topic is how much investments Shopify was planning to build a competitive fulfillment business, which can “take a lot of time and money,” Kessler added.
The company expects capital expenditures of $200 million, stock-based compensation expense and related payroll taxes of $800 million, and amortization of acquired intangible assets of $28 million, according to an earnings report.
Shopify said it had a strong fourth quarter, driven by a “great holiday sales season,” according to CFO Amy Shapiro.
Commercial solutions revenue was $1.03 billion, up 47% year over year, and subscription solutions increased 26% to $351.2 million.
Total merchandise volume in the fourth quarter was $54.1 billion, an increase of 31% over the previous year. Total payment volume grew to $27.7 billion, representing 51% of GMV processed in the quarter. The company said that during the Black Friday weekend globally, sales on the platform reached more than $6.3 billion.
During fiscal year 2021, Shopify launched a series of new initiatives to attract more merchants, such as TikTok Shopping, which enabled merchants with a TikTok for Business account to link directly to their online store from the popular content app. The company also launched new retail devices in six new markets, including Europe and Australia, as well as a money management product for merchants in the United States.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
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