Shopify (SHOP) anticipates secular tailwinds for digital commerce transformation in 2022

Shopify Inc. (NYSE: SHOP) delivered better-than-expected earnings results for the fourth quarter of 2021 on Wednesday. However the company’s forecasts for a slowdown in revenue growth for the first half of 2022 did not impress the Street and the stock plummeted over 17% during the day.

Quarterly performance

Total revenue rose 41% to $1.38 billion from the year-ago period surpassing estimates. Net loss was $2.95 per share compared to EPS of $0.99 last year on a reported basis. Adjusted EPS dropped to $1.36 from $1.58 last year but still came ahead of analysts’ projections.

Notable trends

Shopify said it has nearly tripled revenue and more than doubled gross merchandise volume over the last two years and the number of merchants using its platform is now nearly twice as big as the levels seen in 2019.

The company’s Q4 results were driven by a strong holiday selling season during which its merchants saw their collective sales grow faster than the overall ecommerce industry over the Black Friday Cyber Monday weekend.

Gross merchandise volume (GMV) for the fourth quarter rose 31% year-over-year to $54.1 billion while gross payments volume (GPV) grew 45% to $27.7 billion. Monthly recurring revenue (MRR) crossed $100 million for the first time and increased 23% YoY. Shopify Plus contributed 29% of MRR compared to 25% last year.

Revenue from Subscription Solutions increased 26% YoY to $351.2 million helped by more merchants joining the platform. Merchant Solutions revenue grew 47% to $1 billion driven by growth in GMV.

Expectations for 2022

Shopify believes that the changes brought on by the pandemic over the past two years to the way in which merchants and consumers operate have broadened the prospects for entrepreneurship and digital commerce.

For 2022, the company anticipates continued secular tailwinds for entrepreneurship and digital commerce transformation. Although factors such as lockdowns and government stimulus that were seen in the first half of 2021 will be absent this year, economic growth is anticipated to support the rise of ecommerce.

Shopify expects revenue growth for full year 2022 to be lower than the 57% growth in revenue achieved in 2021. Despite this, the company expects its revenue growth to outpace the growth of ecommerce helped by the expansion of its services to more merchants in more geographies and the contribution of newly-added products.

Shopify expects its revenue growth to be lower in the first quarter of 2022 and highest in the fourth quarter of the year. This is because it does not expect the pandemic-driven growth in ecommerce that was seen in the early part of 2021 to repeat in the first half of 2022. The changes in terms with apps and theme developers as well as the timing of certain initiatives and investments will also impact revenue growth trends.

Click here to read the full transcript of Shopify’s Q4 2021 earnings conference call