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.

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.