Shares of Shopify (SHOP 2.63%) sank despite the e-commerce software company reporting strong Q4 results and issuing an upbeat outlook. The stock is down about 20% on the year, as of this writing, as it's been caught in the software-as-a-service (SaaS) stock meltdown.
Let's take a closer look at its results and prospects to see if this dip is a good buying opportunity.
NASDAQ: SHOP
Key Data Points
Strong revenue growth results and upbeat outlook
Neither tariffs nor any perceived threat from artificial intelligence (AI) has slowed down Shopify, which continued to deliver strong revenue growth. Meanwhile, the company is leaning into AI and agentic AI commerce to help drive its growth. It's now providing merchant AI-powered tools like Sidekick, which can help automate tasks, and Sidekick Pulse, which can proactively give advice based on a retailer's data. It's also developed a universal commerce protocol (UCP) with Alphabet to standardize how AI agents connect with brands on the internet.
Overall, the company's Q4 revenue jumped by 31% to $3.67 billion, which surpassed the $3.58 billion analyst consensus, as compiled by LSEG.
Gross merchandise volume (GMV) on its platform also rose by 31% to $123.84 billion. Europe once again was strong, with GMV climbing 45%, or 35% in constant currencies. B2B (business-to-business) GMV surged 84%, while offline GMV climbed 29%.
Overall, merchant solution revenue increased 35% to $2.9 billion. Subscription revenue, meanwhile, grew 17% to $777 million, largely from customers opting for higher-priced subscription plans. Monthly recurring revenue (MRR), which is the value of all its subscription plans at period end, rose 15% to $205 million.
The company said that $84 billion, or 68%, of its GMV was processed by Shopify Payments in the quarter. This represents a 38% increase in GMV processed and a four-point increase in the percentage processed.
Looking ahead, Shopify forecasts that Q1 revenue will grow at a percentage rate in the low 30s, similar to what it saw in Q4. That was well above the 25.1% growth analysts were looking for, as compiled by FactSet. The company also initiated a $2 billion stock buyback.
Image source: Getty Images,
Should investors buy the dip in the stock?
Following its sell-off, Shopify now trades at around a forward price-to-sales (P/S) ratio of 11 times based on 2026 analyst estimates. Given its growth, that valuation looks like a fair valuation. The company is hitting on all cylinders, and AI looks like a growth driver. However, like other SaaS companies, it is having trouble shaking investor fears that AI will eventually disrupt its business.
Given the current market sentiment toward SaaS stocks, I think investors can take a starter position in the stock, but they should be willing to add to it on a further price dip.
