CA - Shopify: Disappointing Free Cash Flow Guidance An Opportunity For Growth Investors
2024-02-22 22:13:21 ET
Summary
- Shopify is a commerce platform that provides retailers with tools to run online and offline stores.
- The company has produced significant revenue growth in recent years, with its revenue reaching $7.06 billion in 2023.
- It started rolling out generative AI tools designed for helping retailers on its platform in 2023.
Shopify ( SHOP ), the global internet infrastructure company for small and medium-sized retailers, reported its fourth quarter 2023 earnings before the bell on February 13, 2024. Although the company beat analysts' revenue and earnings estimates, the stock dropped 13% due to disappointing free cash flow guidance for the first quarter 2024. After the stock rose 124% in 2023, some investors thought the market overvalued Shopify and were quick to sell on any earnings disappointment. It also didn't help that on the day the company released its earnings, the U.S. Bureau of Labor Statistics released disappointing inflation numbers, possibly delaying when the Federal Reserve ("Fed") will begin reducing interest rates -- terrible for growth companies like Shopify.
However, if you are a Shopify investor, most of its fourth-quarter earnings report contained favorable news for the stock's long-term prospects. This article will discuss the company's earnings report, the long-term growth drivers, the risks, the valuation, and why growth investors should use the stock's recent pullback to start or add to a position.
The company brings Artificial Intelligence tools to the retail industry
Shopify started building generative Artificial Intelligence ("AI") into its platform in early 2023 when it released Magic. The company describes Magic on its website :
Shopify: Disappointing Free Cash Flow Guidance, An Opportunity For Growth Investors
Shopify Magic is a suite of free AI-enabled features that are integrated across Shopify's products and workflows to make it easier for you to start, run, and grow your business. Shopify Magic combines all the power of Shopify with the latest advancements in AI technology to provide personalized, contextually relevant support for a range of tasks across store building, marketing, customer support, and back-office management.
Source: Shopify website.