Shopify (SHOP Quick QuoteSHOP - Free Report) reported fourth-quarter 2022 adjusted earnings of 7 cents per share, comfortably beating the Zacks Consensus Estimate of breakeven but declining 50% year over year.

Total revenues increased 25.7% year over year to $1.74 billion, which beat the Zacks Consensus Estimate by 5.57%.

Quarter in Detail

Subscription Solutions revenues climbed 14% year over year to $400.3 million primarily due to more merchants joining the platform, as well as higher variable platform fees and apps.

Merchant Solutions revenues improved 29.7% year over year to $1.33 billion, driven by strong Gross Merchandise Volume (GMV), which improved 13% year over year to $61 billion.

Shopify Inc. Price, Consensus and EPS Surprise

 

Shopify Inc. price-consensus-eps-surprise-chart | Shopify Inc. Quote

As of Dec 31, 2022, Monthly Recurring Revenues (MRR) were $109.5 million, up 7% from the year-ago quarter. Growth benefited from more merchants joining the platform and an increase in the number of retail locations using POS Pro.

Shopify Plus revenues were $36.6 million, representing 33% of MRR compared with 29% reported in the year-ago quarter.

Gross Payments Volume grew to $34.2 billion, constituting 56% of GMV processed in the fourth quarter compared with $27.7 billion (51% of GMV) in the year-ago quarter.

Shopify Capital advanced $393.2 million in cash and loans to merchants in the United States, Canada, the U.K. and Australia in the reported quarter, up 21% year over year. Since the launch of Shopify Capital, cumulative merchant cash advances have risen to $4.7 billion, out of which $580.1 million was outstanding as of Dec 31, 2022.

Operating Details

Non-GAAP gross profit increased 16.9% year over year to $818.8 million. However, the gross margin contracted 360 basis points (bps) year over year to 47.2%.

Adjusted sales and marketing expenses, as a percentage of revenues, declined 280 bps year over year to 16.2%. Moreover, adjusted research and development expenses, as a percentage of revenues, increased 500 bps year over year to 19.4%. Adjusted general and administrative expenses increased 10 bps to 6.1%.

Non-GAAP operating expenses increased 32.9% year over year to $757.9 million. Operating expenses, as a percentage of revenues, increased 230 bps to 43.7%.

Shopify’s adjusted operating income declined 53.1% year over year to $61 million.

Balance Sheet

As of Dec 31, 2022, Shopify ended the reported quarter with cash, cash equivalents and marketable securities balance of $5.05 billion compared with $4.9 billion as of Sep 30, 2022.

Guidance

For the first quarter of 2023, Shopify expects revenue growth in the high-teen percentages on a year-over-year basis.

The gross margin is expected to be slightly higher than Shopify’s fourth-quarter 2022 gross margin.

Operating expenses are expected to grow in the low-single-digit percentages on a sequential basis.

Zacks Rank & Stocks to Consider

Shopify currently has a Zacks Rank #3 (Hold).

Shopify shares have lost 28.5% in the past year, underperforming the Zacks Computer & Technology sector’s decline of 16.4%.

Baidu (BIDU Quick QuoteBIDU - Free Report) , Everbridge , and Frontier (FYBR Quick QuoteFYBR - Free Report) are some better-ranked stocks that investors can consider in the broader sector. Baidu currently sports a Zacks Rank #1 (Strong Buy), while both Everbridge and Frontier carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Baidu shares have declined 9.1% in the past year. BIDU is set to report its fourth-quarter 2022 results on Feb 22.

Everbridge shares have lost 23.6% in the past year. EVBG is set to report its fourth-quarter 2022 results on Feb 22.

Frontier shares have gained 4.2% in the past year. FYBR is set to report its fourth-quarter 2022 results on Feb 24.