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Here are a few factors that work in Shopify’s (SHOP) favor

Shares of Shopify Inc. (NYSE: SHOP) were up over 2% on Thursday. The stock has gained over 23% in the past three months. The ecommerce company delivered revenue and earnings growth for the fourth quarter of 2023 but provided a light guidance for the first quarter of 2024. Even so, there is optimism around the company’s opportunities in B2B and for international expansion. Here are a few factors that work in its favour:

Revenue and earnings growth

Shopify generated revenues of $2.1 billion for the fourth quarter of 2023, up 24% year-over-year. Excluding the logistics business, revenues grew 30%. The top line growth was driven by strong momentum during the holiday season, increased payments penetration, and growth in the number of merchants on the platform.

The company also recorded revenue growth across both its segments during the quarter. Merchant Solutions revenue grew 21% and Subscription Solutions revenue rose 31% in Q4 compared to last year. Shopify’s gross merchandise volume (GMV) increased 23% to $75.1 billion and its gross payments volume (GPV) grew to $45.1 billion in the quarter.

Shopify reported GAAP EPS of $0.51 in Q4 2023 compared to a loss of $0.49 per share in the year-ago quarter. Adjusted EPS rose to $0.34 from $0.07 last year.

B2B opportunity

The B2B, or business-to-business, channel is an area where Shopify sees significant growth opportunity. As stated on the quarterly conference call, in Q4, this business was up nearly 150% year-over-year with total B2B GMV doubling in 2023. In 2024, the company plans to focus on growing its merchant base and upgrading its B2B offering.

International expansion

Shopify is expanding its international footprint and it continues to invest in building products that serve merchants and buyers across various parts of the world. During the fourth quarter, cross-border GMV made up around 14% of total GMV, and over the Black Friday-Cyber Monday weekend, 15% of all global orders were cross-border.  

On its call, the company said it continues to see strong growth in Europe with growth in the existing merchant base and from new merchant additions. The EMEA region now has over $1.2 billion in annual revenue and represents 27% of Shopify’s total merchant base.

Shopify plans to drive its international growth through various measures such as localization of the online store and themes, integrations with local shipping carriers, launching its tax platforms to global merchants, making point of sale available in more markets, and integrating with local marketplaces and sales channels.

Outlook

On the flip side, Shopify’s outlook for the first quarter of 2024 did not impress the Street. The company expects revenue in Q1 to grow at a low-twenties percentage rate on a year-over-year basis, which translates into a year-over-year growth rate in the mid-to-high-twenties when adjusting for the 500-600 basis points impact from the sale of its logistics businesses.

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