Shopify posted strong 4Q results driven by booming online sales growth as consumers shopped from home due to pandemic-led restrictions. However, shares dropped 3.3% and closed at $1,425 on Feb. 17, as the Canadian e-commerce platform expects sales to grow at a slower pace this year.
Shopify’s (SHOP) 4Q adjusted earnings more than tripled to $1.58 per share on a year-over-year basis and outpaced Street estimates of $1.25. Revenues jumped 94% to $977.7 million topping analysts’ expectations of $910.22 million.
The company’s merchant solutions revenue came in at $698.3 million, up 117% year-over-year, driven mainly by gross merchandise volume (GMV) growth of 99%. Monthly recurring revenue grew 53% to $82.6 million fueled by a rising number of new merchants.
Shopify CFO Amy Shapero said, “Shopify was prepared to ship the features that our merchants needed during the pandemic because we had invested for several years in a future that arrived early with the acceleration of online commerce. We’re amplifying our efforts in 2021, as we focus on executing on a portfolio of initiatives that will fuel further growth for our merchants and for Shopify.” (See Shopify stock analysis on TipRanks)
The company said, “We will continue to grow revenue rapidly in 2021, albeit at a lower rate than in 2020.”
Following the 4Q results, Oppenheimer analyst Brian Schwartz increased the stock’s price target to $1,500 (5.3% upside potential) from $1,300 and reiterated a Buy rating. The analyst believes that “Shopify is a generational technology disruptor in a large and underpenetrated Digital Commerce opportunity that has been catalyzed by the COVID-19 pandemic.”
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 11 analysts suggesting a Buy and 8 analysts recommending a Hold. The average analyst price target of $1,364.51 implies more than 4% downside potential to current levels. Shares have jumped about 44.3% over the past six months.
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