Shopify shares down after company reports light guidance

Shopify's stock experienced a notable downturn of 13.4% on Tuesday following the release of its fourth-quarter earnings report.

Shopify shares down after company reports light guidance

Despite surpassing analyst expectations in earnings per share and revenue, the company's guidance for the current period left investors with mixed feelings.

During the quarter, Shopify outperformed consensus estimates from LSEG, reporting adjusted earnings per share of 34 cents compared to the expected 31 cents, and revenue of $2.14 billion versus the projected $2.08 billion. CFO Jeff Hoffmeister attributed these strong results to increased product sales on the platform, with gross merchandise volume rising by 23% to $75.1 billion, exceeding analysts' expectations of $72.1 billion.

However, the company's cautious outlook for the first quarter dampened enthusiasm. Shopify anticipates a free cash flow margin in the high single digits, falling short of Wall Street's forecasted 13.6%. Wedbush analysts noted that Shopify's guidance suggests an operating income significantly below both their estimates and consensus figures. The company's projected adjusted operating income of $178 million contrasts with consensus estimates of $382 million, leading Wedbush to maintain a neutral rating on Shopify shares.

In terms of revenue growth, Shopify expects a "low-twenties percentage rate" for the first quarter, translating to a mid- to high-20s year-over-year growth rate when adjusting for the sale of its logistics business. Notably, in May, Shopify divested its last-mile Deliverr and fulfillment units to Flexport.

Despite the mixed guidance, Shopify reported a net income of $657 million, or 51 cents per share, for the quarter, a significant improvement compared to the loss of $623 million, or 49 cents per share, in the same period last year.