![]() ![]() ![]() I don't think he will allow SBC to be too large a percentage of revenue in the long run. We see what CFO Hoffmeister was saying when looking at the merchant solutions gross margin for 3Q22 and 4Q22 below relative to prior periods:īeing a big fan of the Parkinson's Law book, CEO Lütke is well aware of the way inefficiencies can become serious issues as companies grow and we can assuage our SBC fears by trusting CEO Lütke's judgment. ![]() This impact on year-over-year comparability will be most prominent in the first half of 2023 given that the Deliverr acquisition closed in July 2022. We currently expect SFN to be a headwind to gross margin and a significant contributor to operating expenses in 2023. Moving to the Shopify Fulfillment Network. Stock-based compensation for Q4 was $142 million compared to $98 million for the same period a year ago, primarily driven by Deliverr and higher headcount. In the 4Q22 call, CFO Jeff Hoffmeister explained the increase in stock-based compensation ("SBC") and the decrease in overall gross margin which fell from 53.8% in 2021 down to 49% in 2022: The 4Q22 results note that the increase is 16% on a constant currency basis: Without making adjustments for currency fluctuations, we see that annual GMV grew 12% from $175.4 billion in 2021 to $197.2 billion in 2022. The declining rate of growth for GMV is a concern. On an annual level for 2022, Shopify's GMV was $197.2 billion versus Amazon's annual 1P sales of $220 billion the gap is narrowing! Valuation Shopify's 2022 Investor Overview shows this massive GMV growth on an annual level along with the revenue growth that came with it: We estimate Amazon's 3P GMV to be 3.75x sales below: The growth for Amazon 1P sales was more modest as it climbed 62% from $39.8 billion in 4Q18 to $64.5 billion in 4Q22. Amazon third-party ("3P") sales went up almost 171% from $13.4 billion in 4Q18 to $36.3 billion in 4Q22. Shopify's GMV has gone up nearly 336% from $14 billion in 4Q18 to $61 billion in 4Q22 per the 4Q22 results. Both Shopify and Amazon have grown prodigiously from the fourth quarter of 2018 to the fourth quarter of 2022. Shopify's GMV growth from 2021 to 2022 wasn't terribly impressive but Shopify President Harley Finkelstein posted a tweet with a multi-year view that reminds us of what has been accomplished since 2019:Īmazon moves fast but Shopify has been moving faster. My thesis is that Shopify's ( NYSE: SHOP) gross merchandise volume ("GMV") is closing in on Amazon ( AMZN) first-party ("1P") sales. ![]()
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