Shopify's blockbuster Q4 2024 report
Company has beaten analysts expectations for 10 consecutive quarters
Larry MacDonald is an investment columnist with the Globe & Mail and author of a new book, The Shopify Story
(Picture credit: Wikimedia Commons)
Before stock markets opened yesterday, Shopify Inc. reported financial results for the fourth quarter of 2024. The company handily beat analysts projections on several counts, particularly revenues and operating profits.
But the stock rose by less than 3% because Shopify’s forecasts for the first quarter of 2025 came in lower than analysts expectations on some series, raising worries about a coming squeeze on operating margins due to R&D spending
This modest price increase was atypical of the past nine quarters. Usually seen are upward spikes averaging 21% or plunges averaging -12%. All these quarters beat analysts’ estimates but the quarters with price drops occurred because Shopify forecasted growth below analysts predictions for the upcoming quarter.
Perhaps a gain of about 3% on the latest earnings release is thus a sign of rising confidence in Shopify’s growth trajectory. The company guided down on some analysts’ projections for the next quarter, yet the stock still held up.
Shopify’s quarterly reports can be a quite an emotional roller coaster ride because they tend to trigger huge price swings. It’s tempting to adopt a trading approach, of buying when one expects an upward spike and selling when ones expects a plunge.
But a trading approach based on such short-term price changes would not be the answer. It’s more of a random walk. Focusing on the long term is better.
If a company has major opportunities and good execution, it should not matter how a stock moves right after an earnings report. No point obsessing over them: a sharp fall in price will be erased in time. Indeed, it could be a buying opportunity when it occurs.
Shopify does have impressive potential with e-commerce is still on a strong growth curve. The Boston Consulting Group expects it to reach 41% of all retail sales globally by 2027, which is an annual growth rate of 9%.
Within this expanding market, Shopify’s continues to grow market share. While Amazon.com remains the largest e-commerce marketplace selling to consumers in the U.S., when it comes to e-commerce platforms serving merchants in the U.S., Shopify is the largest with a 30% claim, according to Statista.