Key Morningstar Metrics for Shopify
- : C$163.00Fair Value Estimate
- : ★★★Morningstar Rating
- : NarrowMorningstar Economic Moat Rating
- : Very HighMorningstar Uncertainty Rating
What We Thought of Shopify’s Earnings
Shopify’s SHOP first-quarter results were better than both the firm’s outlook and FactSet consensus estimates. Revenue grew 34% year over year to USD 3.17 billion, while non-GAAP operating margin was 16.4%. Near-term guidance is consistent with our expectations and recent trends.
Why it matters: Shopify delivered strong results, with upside to both our revenue and profitability expectations. Given that the firm provides directional guidance and estimate dispersion is high, the results were nicely above FactSet consensus estimates on both the top and bottom lines.
- Strong first-quarter demand was driven by gross merchandise volume expansion, which was up 30% year over year in constant currency, merchant additions, international expansion, and success in offline sales—all consistent with recent quarters. Conflicts in Ukraine and Iran are not having an impact.
- Key items were ahead of our model and consistent with positive e-commerce trends. First-quarter subscription revenue was USD 750 million (up 21% year over year), merchant solutions revenue was USD 2.42 billion (up 39% year over year), and GMV hit USD 100 billion for the second straight quarter.
The bottom line: We’ve dropped our fair value estimate to C$163 per share from C$164, based on currency changes. Results are good, and the outlook is consistent with both our and FactSet consensus expectations.
- We view the stock as fairly valued. Shares are gapping down intraday on May 5, which we attribute to in-line guidance following two quarters of strong results. Despite artificial intelligence fears for software vendors, we think Shopify should be more insulated because only about 25% of revenue is actually from software.
Coming up: The second-quarter outlook is in line with our expectations. Guidance includes revenue growth in the high 20% area year over year, gross profit growth in the mid 20% area, and operating expenses of 35% to 36% of revenue.
