Shopify Inc (SHOP: NYE) witnessed its stock drop by a huge 10% in the fourth quarter of 2023, even though it had a great quarter with 24% more sales than the previous quarter and non-GAAP EPS of $0.34. What could have made this connection go bad?
Key Highlights of Shopify’s Q4 Report:
Below are the key points from Shopify’s Q4 reports:
- Revenue surge: Sales climbed 24% year-over-year to $2.14 billion, beating analyst expectations by a significant $60 million.
- Profitable quarter: Non-GAAP earnings per share (EPS) reached $0.34, exceeding the forecasted $0.31.
- Future outlook: Shopify projected low 20% revenue growth for Q1 2024, adjusting for the sale of its Deliverr logistics business.
Stock Target Advisor’s Take on Shopify:
Stock Target Advisor issued a ‘Sell’ rating on Shopify. The analyst target price over the next 12 months is set at USD 72.00, a substantial decline from the last closing price of USD 77.18.
The positive signals such as low debt, high market capitalization and superior revenue growth were overshadowed by the negative signals: heightened price compared to the book value and earnings, high volatility, and negative cash flow along with free cash flow coupled with low earnings growth.
Despite its recent market stumble, a total of 31 covering analysts gave Shopify a ‘Buy’ rating with an average target price of 72. However, market trends within the sector showed an average 1-month return of 0.71% and 1-week return of -1.44%.
Conclusion:
Shopify’s long-term prospects are bright despite the market’s initial reaction. The company has a strong platform, a growing user base, and a strong e-commerce presence. However, managing investor expectations and demonstrating good growth will help the stock recover.
Muzzammil is a content writer at Stock Target Advisor. He has been writing stock news and analysis at Stock Target Advisor since 2023 and has worked in the financial domain in various roles since 2020. He has previously worked on an equity research firm that analyzed companies listed on the stock markets in the U.S. and Canada and performed fundamental and qualitative analyses of management strength, business strategy, and product/services forecast as indicated by major brokers covering the stock.
