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Chapter 1: What caused Shopify's stock to drop after a promising earnings report?
Spotify's earnings and conference call had two very different reactions. This is Motley Fool Money. Tyler Crowe Welcome to Motley Fool Money! I'm Tyler Crowe. Today, I'm joined by longtime Fool contributors, Matt Frankel and John Quast. We've got a pretty good show today. We're going to talk about Moderna's recent challenges with the FDA approval on some of its flu vaccines.
We'll do our normal Thursday thing where we do stocks on our radar. But we wanted to open today's show with Shopify's up and down day yesterday with its fourth quarter earnings report. I think Shopify investors probably have their necks treated for whiplash yesterday. Before the market opened and the company reported fourth quarter earnings, it was poised for a great day.
The stock was up 13% in pre-market trading. Then as management basically started to discuss results and get questions in the conference call, the stock started plummeting Actually, by the end of the day, it was down 6% from the prior day close.
Chapter 2: What is agentic commerce and how does it impact e-commerce?
I have hosting duties here, so I will admit I'm not the most ardent follower of Shopify, so I'm going to lean on you guys a little bit more here. But at the first glance of the results that I looked at, I was like, they're pretty good, right? Matt, what did they say?
First of all, Tyler, in the past couple of weeks, we've seen a few earnings reports where it's up in pre-market trading or after hours the night before, then management opens their mouth and it changes. This is definitely not the only case we've seen this quarter. But yeah, the numbers looked extremely strong, at least on the surface to me.
31% year-over-year revenue growth, which is exactly the same as a year ago, so it's not even decelerating as the business scales. Solid growth in free cash flow, operating profit, pretty much every other metric. Merchandise volume through the platform grew by 29% for the full year of 2025. There's now three times as much merchandise flowing through Shopify's platform than just five years ago.
International growth was a really strong point. The ShopPay checkout platform Volume through that grew 62% year over year. It's looking really good. The company authorized a new $2 billion buyback.
Chapter 3: What challenges is Moderna facing with the FDA regarding its flu vaccine?
Even the first quarter guidance was well ahead of what analysts were looking for, which has not been the case with a lot of other software companies. It wasn't a perfect report. The big headline is they missed earnings. They missed EPS estimates by a few cents. Free cash flow margin contracted a bit. As I just mentioned, net income declined year over year.
But there really wasn't much to dislike in the report other than that EPS miss. which the market will usually forgive for a company that is growing at a faster-than-expected pace. It looked really solid on the surface.
The one thing I did notice on that EPS miss was it looked like it retired some, I can't remember if it was preferred shares or convertible debt, which on a GAAP basis doesn't look good. But overall, when you're doing those things, it's a good idea. Again, I'm not 100% plugged into the expectation games for Shopify, but I thought the numbers looked fine.
John, what was said on the conference call that made the market go, hey, wait a minute, what's this?
I'm going to share a little trick with investors. If you ever see a stock drop after the conference call and you wonder what was said, tune into the first question asked from analysts, and that'll probably be what the culprit is.
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Chapter 4: How does the FDA's refusal to review Moderna's vaccine affect its future?
In this case, the first three questions from analysts to Shopify was tackling the same issue. That's the thing that was on everyone's mind. It's a trend that they're calling agentic commerce. Tyler, investing is all about the future, right? The numbers were fine looking back, but investors have questions about what agentic commerce means for Shopify going forward.
It appears that there is a big change coming, an important restructuring, if you will, coming to e-commerce. Just to take a step back, how is AI used in commerce right now? Well, generally speaking, consumers are using AI to research what to buy.
But it's quickly moving towards a world where an AI agent is going to be told what to do, what to look for in a product, and buy it with your financial information on your behalf. It's going to be able to handle the transaction from start to finish. Shopify is building open-source infrastructure called Universal Commerce Protocol. It's building this with Google.
This is open source, so this isn't necessarily a competitive advantage for Shopify. It is something that Shopify will use, though. Listen, I don't really know what this all means, to be perfectly honest, but let's consider a couple of changes that agentic commerce could bring.
Chapter 5: What are the implications of AI on consumer purchasing behavior?
First, why do you buy what you buy and click what you click? Human decision-making is one thing, but how a machine is going to make decisions is another thing. That's something that could really change e-commerce and digital advertising, for that matter. Take a business like Pinterest. Pinterest can understand trends and user intent because the searches are happening on its own platform.
With agentic commerce, this could be disintermediated from the platforms as people interact with portals like Cloud or ChatGPT. What we're saying here is, the Shopify numbers look great, but this is related to that whole SaaSpocalypse, AI is changing everything. Ecommerce is about to change, and the question is, does it hurt or help Shopify?
To follow up, I want to toss this to both of you. No. 1, are you Shopify investors? If so, was any of this thesis between the numbers and between what they said in the conference call, is this thesis-altering stuff or just market jitters? Or maybe if you're not a Shopify investor, does this make you more or less likely to buy?
Full disclosure, I have owned Shopify stock in the past.
Chapter 6: How is Shopify adapting to changes in the e-commerce landscape?
I don't currently own a position. I would say that this is more market jitters than the breaking of the investment thesis. There could be some execution risk here, for sure. Agentic Commerce is a new animal, and I don't know exactly how it's going to shake out. It does have some valuation risk as well, in my opinion. Shopify stock is always kind of pricey.
When you stack the execution risk with the valuation risk, it's not a stock that's high up on my watch list right now.
I do own it. I opened a position in 2022, I believe, right after the stock plunge. Last time, they were calling for the death of SaaS companies. It was right at the end of the pandemic when e-commerce was drying up and things like that. It's been a very solid investment for me so far. One thing I would say,
is that while the threats of agentic AI shopping are certainly to be taken seriously, but on the other hand, Shopify has been challenged before with new technologies and has historically done a great job of adapting. I have no reason to believe that won't happen now.
Chapter 7: What stocks are currently on the radar of the hosts?
They're so ingrained in their customers' business. They do a whole lot of different things for each of their customers. It's not just as a shopping platform. I think it's an opportunity here, in my opinion.
As the host who doesn't spend as much time with Shopify, I'm going to default to you guys on this one. After the break, we're going to take a look at Moderna's bridge over troubled water here.
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Earlier this week, we learned that the FDA refused to consider Moderna's recent flu vaccination for approval. Based on some of the reporting from the Wall Street Journal, the decision wasn't without controversy.
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Chapter 8: What investment opportunities do the hosts see in the current market?
And this is the second time in a year that the current administration has kind of come down against Moderna. Back in May, the Department of Health and Human Services canceled a $590 million contract to develop an mRNA vaccine against avian flu after issuing the contract five months prior.
Now, I bring this up, both the flu vaccination refusal to consider and the avian flu grant cancellation, because these vaccines were what management considered their bridge treatments that it would use to fund its earlier stage vaccinations for things like cancer and rare diseases, where it really wants to go with its mRNA technology.
And without it, it will have to rely on the revenue it gets from its current commercial products, which are its COVID vaccines. And it has, I think, one flu vaccine right now. The thing is, it's burning through a rather large amount of cash to do all of that development, and the COVID vaccinations aren't quite filling the gaps.
Now, I don't know about you two, but I'm having a hard time making a sense of all this. And if... These recent decisions from the FDA drastically alter Moderna's strategy over the next several years.
I'm not going to sit here and try to make sense of the FDA's decision here. It's kind of a head scratcher to the three of us and to Moderna in general. I follow the company pretty closely. It's definitely a setback, but it's not what I would consider a game changer. I'll tell you why. On one hand, the flu vaccine is by far the furthest along of the 50-plus candidates Moderna has in its pipeline.
But on the other hand, it is still one of more than 50. It's important to put this into perspective. Essentially, the FDA took issue with the methods of Moderna's late-stage clinical trials with this flu vaccine. I'm not saying that they don't want an mRNA flu vaccine, just they have issues with the methods. It's curious that they approved the method earlier and then went back on it.
It's really worth noting that the U.S. is just one market. the U.S. not starting a clinical review process. They've already had these applications approved in the EU, in Canada, in Australia. There's others expected soon. It's not like this is a death knell for the project, even if the FDA doesn't consider it, ultimately. In the clinical trials, the mRNA flu vaccine did show
greater efficacy by a significant amount compared with the traditional flu vaccines that we get now. Moderna has other candidates in late stage, which are like Phase III trials, including several of its cancer treatments. The company recently said that it's hoping to secure 10 different product approvals by the end of next year, 2027. This is just one piece of the puzzle.
Not saying that this isn't a big deal, but it is important to keep this in perspective.
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