Shopify (SHOP  ) finished 2% lower following its Q4 earnings that topped analysts' expectations for sales and earnings. Prior to the earnings reports, Shopify had been breaking out to new highs and still sports a 30% gain in February which implies the post-earnings reaction is profit-taking.

Inside the Numbers

In Q4, Shopify reported $1.58 per share in earnings which were above consensus expectations of $1.29. It was also a significant improvement from last year's $0.43 per share. Revenue increased 94% to $978 million, which handily beat the expectations of $913 million.

Gross merchandise volume (GMV) sharply rose 99% to $41.1 billion while analysts were forecasting $38.21 billion. This marks a slight deceleration from the past two quarters as Q2 had 119% growth in GMV, while Q3 had 109% growth. Subscription revenue rose 53% to $279 million, which beat the consensus of $265 million. Merchant solutions revenue climbed 117% to $698 million while analysts were looking for $649 million.

In terms of 2021, the company didn't issue firm guidance but said it expects revenue growth to slow due to the vaccine's distribution and the economy reopening which should result in higher levels of in-person spending. However, it still expects to maintain growth albeit at a smaller pace. Currently, analysts are looking for 2021 revenue of $3.82 billion which would be 301% growth from 2020.

Stock Price Outlook

Shopify's business has been one of the biggest beneficiaries of the pandemic as it helps small businesses sell online. As a result, the stock is up more than 250% since the March bottom. While it was a leader during the first few months of the rally, the stock had been range-bound over the past few months.

However, the stock has been quite strong in February, breaking out to new highs. Despite these recent gains, the stock is going to face some more significant challenges in the coming months. For one, it will be compared to 2020 comps which were significantly inflated due to the coronavirus. Additionally, the company plans to increase spending on sales and marketing as well as R&D. The company is also planning to invest in its own fulfillment network in the US which should lead to faster deliveries, create a new revenue stream, and remain competitive with Amazon (AMZN  ).