Shopify Shares Drop Amid Q4 2024 Estimates Beat
Shopify (TSX: SHOP) reported its fourth-quarter performance that surpassed analyst estimates, with quarterly revenue jumping 31% year over year to $2.8 billion, up from $2.14 billion in the same quarter last year.
For the entire 2024 fiscal year, revenue totaled $8.88 billion, marking a 26% increase from $7.06 billion in 2023. The jump was fueled by both Subscription Solutions and Merchant Solutions, with the latter benefiting from higher Gross Merchandise Volume, which rose to $292.28 billion for the full year. This represented a 24% gain over 2023’s GMV of $235.91 billion.
Quarterly GMV reached $94.46 billion, up 26% from $75.13 billion in the same period last year and beating Wall Street projections of around $93 billion.
Company executives also highlighted that gross profit for the quarter rose to $1.35 billion from $1.06 billion a year earlier, while the full-year gross profit reached $4.47 billion, up from $3.52 billion in 2023.
Quarterly operating expenses rose to $887 million from $773 million in the same period last year, primarily attributable to higher sales and marketing costs and increased transaction and loan losses, offset somewhat by lower general and administrative expenses. Across the entire 2024 fiscal year, total operating expenses dropped to $3.40 billion from $4.93 billion in 2023, as the prior-year figure was adversely impacted by a $1.34 billion impairment on Shopify’s former logistics businesses.
Fourth-quarter operating income reached $465 million, compared to $289 million in the fourth quarter of 2023. Full-year operating income came in at $1.07 billion after the company reported an operating loss of $1.42 billion a year earlier.
The quarter’s results highlight the success of Shopify’s continued efforts to streamline its operating model after exiting in-house logistics in 2023, as well as the growing impact of larger enterprise merchants signing onto the platform. In particular, the Merchant Solutions segment benefited from expansions in Shop Pay, offline point-of-sale solutions, and business-to-business offerings, which collectively saw revenue surge 33% year over year.
Shopify recorded fourth-quarter net income of $1.29 billion, a jump from $657 million in the same period last year, though that figure was influenced by an $835 million mark-to-market gain on the value of equity investments. Excluding those equity gains, net income for the quarter was $458 million, compared to $337 million in 2023. On a full-year basis, net income excluding equity investments stood at $1.24 billion, a swing from a loss of $1.23 billion in the prior year.
The firm generated $611 million in free cash flow, up from $446 million in the comparable period last year. Cash flow from operating activities increased to $615 million, up from $448 million a year earlier. This improvement brought full-year operating cash flow to $1.62 billion, a climb from $944 million in 2023.
Shopify ended 2024 with $1.50 billion in cash and cash equivalents, up from $1.41 billion at the close of the prior year. Total current assets now stand at $7.25 billion dollars while current liabilities reached $1.96 billion dollars.
Looking ahead, Shopify forecasts mid-20% year-over-year revenue growth for the first quarter of 2025, reflecting seasonal softness following the holiday period but still buoyed by the momentum built in the latter part of 2024. Gross profit is expected to rise at a low-20% pace, while operating expenses as a percentage of revenue are projected to be between 41% and 42%.
The company also anticipates stock-based compensation to total $120 million for the quarter and free cash flow margin to remain in the mid-teens.
Information for this story was found via Bloomberg and the sources and the companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
