Buy Shopify on the dip, says National Bank

Solid quarterly results have National Bank Financial analyst Richard Tse staying bullish on Shopify (Shopify Stock Quote, Charts, News, Analysts, Financials NYSE:SHOP) in a Friday report. At the same time, Tse said with a conservative first quarter guidance coming from management, investors should expect shares to see little upside at least over the short term.

E-commerce platform Shopify released its fourth quarter financials on Wednesday, reporting Gross Merchandise Volume (GMV) up 13 per cent year-over-year to $61.0 billion and total revenue up 26 per cent to $1.7 billion. Adjusted EPS was $0.07 per share compared to $0.14 per share a year earlier and its operating loss was $188.7 million compared to operating income of $14.4 million a year earlier. (All figures in US dollars.)

“The strength of our Q4 and full year performance in 2022 is a testament to the resilience of our merchants. Despite persistent macroeconomic challenges, they continued to succeed on Shopify, growing sales and using more of our mission-critical tools to run their businesses,” said President Harley Finkelstein in a press release.

Looking at the results, Tse called the 26 per cent revenue growth impressive, especially considering Shopify’s already considerable revenue base, tough comps from a year earlier where fourth quarter topline growth was 41 per cent and, as well, notable macro headwinds in the form of inflation and higher interest rates.

“Shopify reported solid FQ4 results with revenue in line with our (NBF) street high expectation and better- than-expected profitability,” Tse wrote.

Tse said the $1.735 billion topline was a bit under his estimate at $1.752 billion but better than the consensus at $1.650 billion, while the adjusted EPS at $0.07 was a beat of both National Bank’s estimate at negative $0.01 per share and the Street also at negative $0.01.

Tse said the takeaway from the Q4 results as well as National Bank’s meetings with management has refuelled his confidence in the company’s prospects going forward. Tse said a growing take rate, expanding portfolio of services and good-looking initial progress on the company’s Deliverr acquisition, which should help accelerate SHOP’s Fulfillment Network.

“Bottom line, while the outlook for FQ1 may not be as robust as hoped; we think it reflects some conservatism in this market backdrop. More importantly, the FQ4 results suggest continued execution on a sizeable (and growing) market opportunity. We’d be opportunistic on any pullback,” Tse wrote.

With the update, Tse maintained an “Outperform” rating on Shopify and $60.00 target price, which at the time of publication represented a projected one-year return of 12.4 per cent.