Shopify (SHOP, Financial) demonstrated strong execution in the first quarter, according to Jefferies, indicating ongoing solid business momentum. Despite this, Jefferies suggests that the stock may remain within a certain range in the near future due to diminishing levels of outperformance and unresolved tariff concerns.
The firm's analysis highlights that Shopify's second-quarter guidance aligns with market expectations for revenue growth but does not meet the anticipated profit margins. Although estimates are not expected to increase significantly, Jefferies acknowledges that the company's manageable aspects were competently handled.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 43 analysts, the average target price for Shopify Inc (SHOP, Financial) is $132.95 with a high estimate of $175.00 and a low estimate of $87.64. The average target implies an upside of 42.93% from the current price of $93.02. More detailed estimate data can be found on the Shopify Inc (SHOP) Forecast page.
Based on the consensus recommendation from 48 brokerage firms, Shopify Inc's (SHOP, Financial) average brokerage recommendation is currently 2.2, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Shopify Inc (SHOP, Financial) in one year is $109.15, suggesting a upside of 17.34% from the current price of $93.02. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Shopify Inc (SHOP) Summary page.
SHOP Key Business Developments
Release Date: February 11, 2025
- Revenue: $9 billion for the year, with Q4 revenue growth of 31% year-over-year.
- Gross Merchandise Volume (GMV): Nearly $300 billion for the year, with Q4 GMV growth of 26% year-over-year.
- Free Cash Flow Margin: 18% for the year, with Q4 free cash flow margin at 22%.
- Operating Income: Surpassed $1 billion for the year, four times higher than the previous peak in 2021.
- North American Revenue: Up 23%, with the US crossing $5.7 billion in revenue.
- International Revenue Growth: 33% for the year.
- Offline Revenue: Grew 33% to $588 million for the year.
- Shop Pay GPV: 38% of GPV, up from 33% in 2023.
- Merchant Solutions Revenue: Increased 33% year-over-year in Q4.
- Subscription Solutions Revenue: Up 27% over Q4 of last year.
- Gross Profit: $1.4 billion for Q4, up 27% year-over-year.
- Operating Expenses: Reduced to 32% of revenues in Q4.
- Headcount: Approximately 8,100 employees as of December 31, 2024, down from 8,300 at the end of 2023.
- Free Cash Flow: $611 million in Q4, with a full-year free cash flow of $1.6 billion, up 77% year-over-year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Shopify Inc (SHOP, Financial) achieved significant growth in 2024, with a 31% revenue increase in Q4 and a 26% annual revenue growth, demonstrating strong financial performance.
- The company expanded its global reach, with international regions outperforming North America, achieving a 33% growth rate for the year.
- Shopify Inc (SHOP) surpassed $1 billion in operating income for the year, marking a significant milestone and showcasing its profitability.
- The company continued to innovate, launching new products and features such as Shopify Balancer Plus and expanding Shopify Tax in the UK and EU.
- Shopify Inc (SHOP) strengthened its position in the enterprise market, signing major brands like Reebok, Champion, and FC Barcelona, indicating its growing appeal to larger businesses.
Negative Points
- The shift to three-month paid trials is expected to impact Q1 and Q2 MRR growth, posing a potential challenge to short-term revenue.
- Subscription Solutions gross margin decreased due to higher cloud and infrastructure hosting costs, which may affect future profitability.
- Merchant Solutions gross margin also saw a decline, driven by lower noncash revenues from certain partnerships and the impact of the expanded partnership with PayPal.
- Operating expenses, while reduced, still represent a significant portion of revenues, indicating room for further efficiency improvements.
- The company faces challenges in maintaining its growth momentum, particularly in the face of potential economic headwinds and competitive pressures in the e-commerce space.
