But Canadian tech darling expects slower growth this year
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Shopify Inc.’s revenue beat expectations in the final quarter of 2021, powered by a strong holiday shopping season.
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Users and customers helped boost the software-maker’s revenue to US$1.38 billion, a 41 per cent increase compared to a year prior. Analysts were expecting $1.33 billion, according to Refinitiv data.
Gross merchandise value on the platform grew 31 per cent compared to the last holiday season in 2020 to US$54.1 billion. The company posted a net loss in the fourth quarter ended Dec. 31, 2021, down US$371.3 million or US$2.95 per diluted share.
“Our merchants had an incredible holiday selling season, which powered Shopify’s strong fourth-quarter results, with their collective sales growing significantly faster than the overall e-commerce industry over the Black Friday Cyber Monday weekend,” said Amy Shapero, Shopify’s CFO.
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The company also said revenue for the whole year topped 2020 by 57 per cent. Shopify brought in US$4.61 billion for 2021. It provided generic forward guidance, indicating it expects growth to be lower in the first quarter of 2022 and “highest” in the fourth quarter. That’s because it doesn’t expect e-commerce to pick up as it did in 2021 due to COVID-19 lockdowns.
“(Also), we expect certain commercial initiatives and sales and marketing investments will gain momentum over the course of 2022,” the company added in the press release.
The strong earnings could provide traders some comfort that Shopify, the Ottawa-based maker of software that supports e-commerce sites and Canada’s champion in the digital economy, will emerge from the volatility that characterized equity markets this year.
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In Toronto and New York, indices have been on a rollercoaster that has been headed down more often than up. The prospect of higher interest rates and uncertainty over whether Russian President Vladimir Putin will invade Ukraine have combined to cause investors to retreat from growth stocks such as Shopify.
Shopify did well during the first phase of the pandemic. Its share price surged more than 58 per cent between March 2, 2020 and May 6, 2020, pushing its market capitalization to $121 billion, unseating Royal Bank of Canada as the most valuable company on the Toronto Stock Exchange.
Founder and chief executive Tobi Lütke’s company lost that title in the first week of January, falling back below RBC, before tumbling past Toronto-Dominion Bank to third place.
The stock closed at $1,132.62 on Tuesday, recovering some early week losses and picking up from a 2022 low of $1,027.74 on Feb. 3. Many analysts had cut their ratings of Shopify shares, deeming them to be too overvalued in the economic environment ahead.
Dan Romanoff, an analyst at Morningstar Inc., said in an interview last month that while Shopify is overvalued, the business itself is sound.
“I quite honestly am not really concerned about how Shopify is going to pull through,” Romanoff said. “Their balance sheet is great. They are earning nice margins and revenue growth is still strong.”
