Shopify Shares Slide as Costs Guidance Suggests Tighter Margins Than Expected

By Adriano Marchese

Shopify shares were sharply lower Tuesday morning after the company reported higher costs that could weigh on margins in the first quarter.

In the morning, shares were trading 8.3% lower in Toronto at 110.05 Canadian dollars ($81.81).

The ecommerce giant said that it expects operating expense dollars to be up at a low-teens percentage rate compared with the fourth quarter.

TD Cowen analyst Daniel Chan said in a report that based on this guidance, he estimates operating margin could be in the low double-digits, below previous expectations of 14% to 15%.

"The lower-than-expected operating margin is likely reflected in free cash flow margin guidance for a step down from the strong 21% in the fourth quarter to the high-single digits, but it is expected to improve q/q throughout the year," he said.

Meanwhile, in its fourth-quarter results, Shopify reported a profit and better-than-expected revenue, due to more products being sold through its platform, and said that it expects better revenue growth this year.

Profit came in at $657 million, or 51 cents a share, compared with a loss of $623.7 million or 49 cents a share in the prior-year period. Revenues topped expectations, rising to $2.14 billion from $1.73 billion and above analyst forecasts of a rise to $2.08 billion.

Write to Adriano Marchese at adriano.marchese@wsj.com

(END) Dow Jones Newswires

February 13, 2024 10:04 ET (15:04 GMT)

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