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SHOP Stock Down 3%, Shopify Has Lower Revenue Growth Expectations for 2021

| Updated
by Steve Muchoki · 3 min read
SHOP Stock Down 3%, Shopify Has Lower Revenue Growth Expectations for 2021
Photo: NYSE / Twitter

Shopify has thrived significantly during the pandemic, but the possibility of a coronavirus crisis subsiding in the coming quarters leaves the business with some degree of uncertainty.

Shares of e-commerce giant Shopify Inc (NYSE: SHOP) dropped about 5% yesterday, even after reporting better than anticipated earnings and revenue in Q4 2020. However, Shopify stock closed the day trading at $1,425, 3.3% down. Shopify earned an adjusted $1.58 per share during the fourth quarter, beating the $1.26 consensus estimate, according to Refinitiv.

Besides, the company reported a revenue of $910 million during the past three months that preceded December. However, Shopify reported that it expects its revenue growth in 2021 to be lower than last year’s, which perhaps triggered the market sell-off.

Shopify Stock Performance

The company has been one of the pandemics’ stock winners thanks to the huge demand in the eCommerce industry. Shopify shares gained approximately 162.33% last year, and are now up around 25% year-to-date according to market analytics provided by MarketWatch. Moreover, they have added over 52%, and 18% in the past three months and one month respectively.

“We expect that we will continue to grow revenue rapidly in 2021, albeit at a lower rate than in 2020. While we expect that the first quarter will likely still contribute the smallest share of full-year revenue and the fourth quarter the largest, the revenue spread may be more evenly distributed across the four quarters than it has been historically if the rollout of a vaccine shifts more spending to services and offline shopping towards the back half of the year.” Shopify noted in the earnings release.

Shopify has thrived significantly during the pandemic, but the possibility of a coronavirus crisis subsiding in the coming quarters leaves the business with some degree of uncertainty. As a result, investors are wary of buying Shopify stock, thereby leaving most hedge fund managers and retail investors to short Shopify stock unanimously.

Coronavirus vaccine development has been given the utmost priority by most pharmaceutical companies around the world. In addition, most governments are focused on how to tackle the pandemic and charm the market to rise beyond the coronavirus market turmoil.

Notably, Shopify continues to face fierce competition from Amazon.com Inc (NASDAQ: AMZN) both in the United States and overseas. Remember, Amazon just announced a strategic acquisition of an Austrian e-commerce company Selz, thereby offering a way to penetrate the Australian market without attracting much attention.

Shopify has a reported market valuation of approximately $181 billion with 110.93 million outstanding shares. Although there are market uncertainties in the Shopify line of business, analysts remain positive about the company’s ability to deliver this year. Notably, a surgery done by MarketWatch indicates Shopify stocks received an average of Over rating from 28 ratings.

In a note to clients, Jefferies analyst Samad Samana said the company experienced a high demand for its business during the past three months that preceded January. “We believe Q4 results were largely in-line with high buy-side expectations. SHOP also sounded confident on 2021 growth,” Samana noted.

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Steve Muchoki

A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies. Mythology is my mystery! "You cannot enslave a mind that knows itself. That values itself. That understands itself."

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