Shopify Shares Fall 18% After Q1 Earnings

Shoaib Chaudhry
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  • Earnings Announced After Market Close on May 7th, 2024Earnings Announced Before Market Open on May 8th, 2024

Expected EPS

$0.17

Actual EPS

$0.20

  • Revenue and GMV Increase: Shopify’s revenue surged by 23% to $1.9 billion, with a 29% adjusted increase after accounting for the sale of logistics operations. Gross Merchandise Volume (GMV) also grew by 23%, indicating robust merchant activity.
  • Profitability Enhancements: Gross profit rose 33% to $957 million, with gross margin improving to 51.4% due to strategic adjustments and efficiencies.
  • Positive Outlook for 2024: Shopify forecasts high-teens revenue growth for Q2 2024, adjusted for the logistics business sale, with consistent free cash flow margins as seen in Q1.
Shopify Branding

Shopify, Inc. (SHOP) the renowned provider of essential internet infrastructure for commerce, has reported an exceptional start to 2024, showcasing significant growth and operational efficiency in its Q1 earnings.

Q1 2024 Financial Highlights:

  • Gross Merchandise Volume (GMV): Increased by 23% year-over-year, totaling $60.9 billion, signaling robust merchant activity and platform engagement.
  • Revenue Growth: Rose by 23% from the previous year to $1.9 billion. Adjusted for the sale of the logistics businesses, revenue growth stood at an impressive 29%.
  • Merchant Solutions Revenue: Climbed 20% due to higher GMV and deeper penetration of Shopify Payments.
  • Subscription Solutions Revenue: Jumped 34%, driven by an increase in merchant numbers and pricing adjustments on standard plans.
  • Gross Profit: Grew 33% to $957 million with a gross margin of 51.4%, benefiting from strategic adjustments and operational efficiencies.

Key Operational Metrics:

  • Gross Payments Volume (GPV): Grew to $36.2 billion, now representing 60% of GMV, up from 56% last year.
  • Monthly Recurring Revenue (MRR): Increased by 32% to $151 million, with Shopify Plus contributing 32% of this figure.

Investor Takeaways:

  1. Consistent Growth: Shopify continues to deliver strong year-over-year growth, emphasizing its resilience and adaptability in the evolving e-commerce landscape.
  2. Robust Financial Health: The significant increase in free cash flow and high gross margin reflects Shopify’s ability to efficiently scale its operations while enhancing profitability.
  3. Future Outlook: With continued focus on operational discipline and innovation, Shopify is well-positioned to sustain its growth trajectory and capitalize on new market opportunities.

Future Guidance

  • Free Cash Flow: Achieved $232 million, with a free cash flow margin of 12%.
  • Cash Reserves: Ended the quarter with $5.2 billion in cash and marketable securities.
  • 2024 Outlook: Shopify expects revenue growth in the high-teens percentage rate year-over-year for Q2 2024, adjusting for the sale of the logistics businesses, and similar free cash flow margins as in Q1.

Editor’s Price Target

Coming Soon.

Conclusion

Shopify’s Q1 2024 results illustrate a promising year ahead, driven by strategic initiatives and a strong commitment to long-term growth. As the company aims to build a “100-year company,” its current performance and future plans suggest Shopify is on a path to achieve lasting success, making it a compelling option for investors looking at sustainable growth in the tech and e-commerce sectors.

Chief Executive Officer

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