Shopify stock falls nearly 7% as forecast disappoints amid escalating Amazon rivalry, price increases


Shopify Inc. produced a better holiday quarter than expected according to a Wednesday earnings report, but a forecast for slowing revenue growth hit the stock in after-hours trading.

Shopify SHOP, +6.55% sells e-commerce tools to merchants, a business that escalated quickly during the pandemic, as traditional bricks-and-mortar businesses jumped online to reach customers who could not visit their stores. Sales growth slowed last year, though, and Shopify recently announced it is increasing prices as it faces competition from Inc. AMZN, +1.46%, which is rolling out its rival Buy with Prime service to more retailers this year.

In their forecast, Shopify executives guided for revenue to grow “in the high-teen percentages” in the fiscal first quarter, while not providing a forecast for any profit metric nor for the full year. Analysts on average were projecting first-quarter revenue of $1.48 billion, according to FactSet, which would be revenue growth of more than 23%.

For the fourth quarter, Shopify reported a loss of $623.7 million, or 49 cents a share, on revenue of $1.73 billion, up from $1.38 billion a year ago. After adjusting for stock-based compensation, gains on investments and other costs, the company reported earnings of 7 cents a share, down from adjusted earnings of 14 cents a share in the holiday quarter of 2021.

Analysts on average expected an adjusted loss of a penny a share on sales of $1.65 billion, according to FactSet. Shopify shares declined nearly 7% in after-hours trading following the release of the results, after closing with a 6.6% increase at $53.39.

Shopify’s stock has taken a hit amid a slowdown in pandemic-era growth for e-commerce, though they have turned around so far in 2023. The stock has declined nearly 40% in the past 12 months, but is up more than 53% so far in 2023; the S&P 500 index SPX, +0.28% has fallen 7.5% and gained 7.7% in those time periods, respectively.

Shopify was one of the first big-name tech companies to cut staff as pandemic growth slowed down, announcing a 10% cut in July of last year. At the time, Chief Executive Tobi Lütke took the blame, saying that he had wagered on continuing strong growth and “it’s now clear that bet didn’t pay off.”

Analysts largely believe those cost-cutting measures will help, but may not overcome the macroeconomic pressures Shopify faces in the near term.

“At a high level, we believe the key challenges for Shopify remain the softening discretionary spending environment and margin pressures from payments and fulfillments, although partially offset by some cost-cutting measures,” Evercore ISI analysts wrote this week while maintaining an outperform rating and $50 target price.


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