For its fourth-quarter of business, Shopify grew its revenue to $977.7 million and easily beat estimates of $913.1 million, while gross merchandising value exploded 99%.
Adjusted earnings of $1.58 a share blew past expectations of $1.26.
Simply put it was a robust quarter for Shopify. So why are we getting a decline in the stock?
It’s a sell-the-news reaction. The stock rallied hard into the print, climbing 34% in just 11 trading days ahead of the event. Amid that stretch, Shopify rallied in nine of those sessions. Both of the two daily declines were less than 1%, as well.
Let’s also not forget the valuation with this stock is very full - and that’s putting it politely.
To see a little air come out of Shopify stock is justified, in my opinion. However, support is stepping in right where it needs to.
At Wednesday’s low, Shopify stock was down almost 9%. Now down about 1% and at its session high in afternoon trading, bulls are clearly stepping in to buy the dip.
While Shopify briefly broke below the 10-day moving average, it’s responding really well to this level. That’s exactly what bulls want to see in a strong-trending stock such as this one.
Previously, Shopify had gone nine sessions without touching this moving average, indicating it was ripe for a pullback.
From here, we also have a solid roadmap to follow. Specifically, we have an idea of where support is, while also having a post-earnings low to measure against at $1,345.
If Shopify moves lower in the coming days and weeks and breaks $1,345, traders may be looking for a retest of the December high near $1,285 and for a test of the 21-day moving average.
Below that could put previous resistance in play, near $1,230, along with the 50-day moving average.
For now though, bulls are flexing their muscles. I want to see if they can push the stock above the two-times range extension and the $1,500 mark. So far this area has been resistance.
A move above it opens the door to the 261.8% extension near $1,623.