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Shopify shares fall even as quarterly revenue beats estimates on demand during holiday shopping season – The Globe and Mail

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Shopify Inc. SHOP-T reported double-digit revenue growth and solid profit for the fourth quarter, topping analyst expectations after a strong holiday season and a year of streamlining its work force.

The Ottawa-based company, which provides tools for businesses to run their stores online, said its revenue was US$2.1-billion for the quarter ended Dec. 31, 2023, up 24 per cent from the same period last year.

Shopify reported net income of US$657-million for the quarter, compared with a net loss of US$623-million a year earlier. “Other income,” including the fluctuating value of its stakes in other companies, made up about 60 per cent of income for the quarter.

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Gross merchandise value – the total sales through its platform – increased 23 per cent to $75.1-billion over the quarter, representing the fifth consecutive quarter of accelerating growth, according to ATB Capital Markets analyst Martin Toner.

Jeff Hoffmeister, Shopify’s chief financial officer, told analysts Tuesday morning the revenue was driven by a strong Black Friday, Cyber Monday and holiday season.

Shopify said it expects revenue to grow “at a low-20s percentage rate,” or “in the mid-to-high-20s” when adjusting for the sale of the logistics business last June. In a Tuesday morning note to investors, Mr. Toner said the quarter underlined Shopify’s ability to “simultaneously grow and expand its bottom line.”

Last week, Shopify increased the price of its Plus subscription plan by 25 per cent, the first time it had done so since 2017. This was after it raised its Basic plan prices the year before for the first time in more than a decade. Despite that price hike, the company experienced little turnover.

But the company’s forecast for sales growth in the first quarter fell short of some expectations. Shares of Shopify closed down more than 12 per cent on the Toronto Stock Exchange on Tuesday.

“For a stock that’s had material appreciation over the past year, expectations were high going into the quarter and [fiscal year 2024], which meant there could be no disruption in trajectory – which is what we got with the company’s outlook,” National Bank of Canada analyst Richard Tse said in a note to investors.

Mr. Tse said the company’s guidance caused some hesitation for analysts related to its rising marketing spending, and concerns about operating leverage.

The company’s fourth-quarter operating expenses were down by 22 per cent compared with last year, owing to the sale of the company’s logistics business and a lower headcount, Mr. Hoffmeister said. The company also faced a real estate impairment charge last year.

However, operating costs are ticking back up quarter-over-quarter.

Last year, the company boosted its marketing spend to reach new customers. On Tuesday, management said it expects operating costs to increase by a “low teens” percentage rate next quarter, attributing roughly half of that expected increase to marketing costs.

This could dull the company’s operating leverage – the relationship between its fixed and variable costs – making it more difficult for Shopify to earn more profit by simply increasing its sales volume.

Shopify president Harvey Finkelstein defended the higher marketing costs, saying the company would continue to take opportunities that offered a good return.

The company has considerable room to grow. Shopify says it only has about 10 per cent of U.S. e-commerce market share right now, and a lower portion of the market in other countries.

The company’s share price has recuperated since last year, up 85 per cent since last February, but is still down about 50 per cent from all-time highs. In contrast, other tech companies such as Microsoft Corp., Meta Platforms Inc. and Nvidia Corp. were galloping to new highs in 2023.

Since last year, the company has attempted to regain the momentum it had early in the pandemic, cutting 20 per cent of its employees last summer as part of efforts to streamline. Although it had spent billions building a logistics business in order to compete with Amazon.com Inc., last year it reversed course, selling its warehousing operations to Silicon Valley-based Flexport Inc. and taking a 19-per-cent equity stake in the company, according to estimates from Canadian Imperial Bank of Commerce analyst Todd Coupland.

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GTA housing prices expected to surge, surpass Vancouver by end of 2024: Royal LePage – CTV News Toronto

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Housing prices in the GTA are expected to rise 10 per cent this year and will likely surpass those in Greater Vancouver by the end of 2024, according to an updated forecast by Royal LePage.

In its latest survey, the brokerage said it was upgrading its national year-end home price forecast after a “stronger-than-expected first quarter.”

Royal LePage said it now expects the national aggregate home price to rise nine per cent year-over-year in the fourth quarter of 2024, up from its previous forecast of 5.5 per cent.

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“Consistent with our previous forecast, the market did reach a critical tipping point in the first quarter of 2024, when home prices bottomed out and began to appreciate again. Clearly, more and more buyers are motivated by the need to get ahead of rising home prices, rather than adopting the strategy of waiting for mortgage rates to fall,” Phil Soper, president and CEO of Royal LePage, said in a written statement.

“Once the central bank does make a move, and that first highly-anticipated cut to rates is made, even if it is only by 25 basis points, I expect we will see the price appreciation curve steepen upwards when the highly rate-focused crowd jumps into the market.”

The GTA, the report noted, is expected to see the greatest price appreciation of all major markets in Canada in 2024.

In the first quarter of 2024, home prices in the GTA increased 5.2 per cent year-over-over to $1,177,700.

The median price of a single-family detached home rose 3.9 per cent year-over-year to $1,454,800 in the first quarter of 2024, while the median price of a condo increased 3.7 per cent to $733,600.

A for sale sign is displayed in front of a house in the Riverdale area of Toronto on Wednesday, September 29, 2021. THE CANADIAN PRESS/Evan Buhler

“The first three months of the year were busier than expected in Toronto and the surrounding regions,” Karen Yolevski, chief operating officer of Royal LePage Real Estate Services Ltd., said in analysis accompanying the survey.

“Warm winter weather and the anticipation of tight competition once the Bank of Canada reverses course on part of its steep interest rate hike campaign have prompted some buyers who had been sidelined last year to re-enter the market with a renewed sense of purpose.”

While the report notes that home prices have “not yet fully recovered from the post-pandemic correction” in most regions, the national aggregate home price is “well above” pre-pandemic levels.

According to data from the Toronto Regional Real Estate Board (TRREB), the average selling price of a Toronto home across all property types peaked at $1,334,062 in February 2022 before dropping to a low of $1,037,542 later in the year.

GTA may soon be Canada’s most expensive housing market

The brokerage previously expected Calgary to see the greatest increase in home values this year but has since moved Toronto to the top of the list, followed by Montreal, where home prices are forecast to increase by 8.5 per cent year-over-year in the fourth quarter of 2024.

“Last year, while property values dipped in most markets across the country, the Calgary real estate market bucked the trend and continued to record home price gains. While activity levels remain strong and prices continue to rise in Alberta, our research indicates that buyer demand, relative to available inventory, is strongest in the two largest urban centres in the country. We now expect Toronto and Montreal to log the highest home price appreciation this year,” Soper added.

Rising prices in Toronto, Royal LePage said, will likely “close the gap” between Canada’s two most expensive real estate markets.

“While Vancouver remains the nation’s most expensive market today, Royal LePage predicts that the aggregate price of a home in the GTA will surpass Greater Vancouver in the second half of 2024,” the report notes.

‘Rapidly transitioning away from a buyers’ market’

Soper said the strong start to the year points to a “normally busy spring market” leading to “an uncomfortably busy fall.”

“It is clear we are rapidly transitioning away from a buyers’ market and back to an environment where the seller has the upper hand,” Soper said.

He noted that interest rate decreases will not be the “primary driver” of rising home prices.

“While real estate boards across the country are reporting a boost in listings, which is typical as we head into the spring market rush, just about every region from coast to coast remains chronically short of housing supply,” Soper said.

“While we expect that interest rate decreases will draw more buyers back into the ring, this will not be the primary driver of rising home prices – it is the severe shortage of housing in markets small and large in virtually every part of the country that remains the main culprit.”

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GTA housing prices could surpass Vancouver by end of 2024: Royal LePage – CP24

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Housing prices in the GTA are expected to rise 10 per cent this year and will likely surpass those in Greater Vancouver by the end of 2024, according to an updated forecast by Royal LePage.

In its latest survey, the brokerage said it was upgrading its national year-end home price forecast after a “stronger-than-expected first quarter.”

Royal LePage said it now expects the national aggregate home price to rise nine per cent year-over-year in the fourth quarter of 2024, up from its previous forecast of 5.5 per cent.

300x250x1

“Consistent with our previous forecast, the market did reach a critical tipping point in the first quarter of 2024, when home prices bottomed out and began to appreciate again. Clearly, more and more buyers are motivated by the need to get ahead of rising home prices, rather than adopting the strategy of waiting for mortgage rates to fall,” Phil Soper, president and CEO of Royal LePage, said in a written statement.

“Once the central bank does make a move, and that first highly-anticipated cut to rates is made, even if it is only by 25 basis points, I expect we will see the price appreciation curve steepen upwards when the highly rate-focused crowd jumps into the market.”

The GTA, the report noted, is expected to see the greatest price appreciation of all major markets in Canada in 2024.

In the first quarter of 2024, home prices in the GTA increased 5.2 per cent year-over-over to $1,177,700.

The median price of a single-family detached home rose 3.9 per cent year-over-year to $1,454,800 in the first quarter of 2024, while the median price of a condo increased 3.7 per cent to $733,600.

“The first three months of the year were busier than expected in Toronto and the surrounding regions,” Karen Yolevski, chief operating officer of Royal LePage Real Estate Services Ltd., said in analysis accompanying the survey.

“Warm winter weather and the anticipation of tight competition once the Bank of Canada reverses course on part of its steep interest rate hike campaign have prompted some buyers who had been sidelined last year to re-enter the market with a renewed sense of purpose.”

While the report notes that home prices have “not yet fully recovered from the post-pandemic correction” in most regions, the national aggregate home price is “well above” pre-pandemic levels.

According to data from the Toronto Regional Real Estate Board (TRREB), the average selling price of a Toronto home across all property types peaked at $1,334,062 in February 2022 before dropping to a low of $1,037,542 later in the year.

 

GTA may soon be Canada’s most expensive housing market

The brokerage previously expected Calgary to see the greatest increase in home values this year but has since moved Toronto to the top of the list, followed by Montreal, where home prices are forecast to increase by 8.5 per cent year-over-year in the fourth quarter of 2024.

“Last year, while property values dipped in most markets across the country, the Calgary real estate market bucked the trend and continued to record home price gains. While activity levels remain strong and prices continue to rise in Alberta, our research indicates that buyer demand, relative to available inventory, is strongest in the two largest urban centres in the country. We now expect Toronto and Montreal to log the highest home price appreciation this year,” Soper added.

Rising prices in Toronto, Royal LePage said, will likely “close the gap” between Canada’s two most expensive real estate markets.

“While Vancouver remains the nation’s most expensive market today, Royal LePage predicts that the aggregate price of a home in the GTA will surpass Greater Vancouver in the second half of 2024,” the report notes.

 

‘Rapidly transitioning away from a buyers’ market’

Soper said the strong start to the year points to a “normally busy spring market” leading to “an uncomfortably busy fall.”

“It is clear we are rapidly transitioning away from a buyers’ market and back to an environment where the seller has the upper hand,” Soper said.

He noted that interest rate decreases will not be the “primary driver” of rising home prices.

“While real estate boards across the country are reporting a boost in listings, which is typical as we head into the spring market rush, just about every region from coast to coast remains chronically short of housing supply,” Soper said.

“While we expect that interest rate decreases will draw more buyers back into the ring, this will not be the primary driver of rising home prices – it is the severe shortage of housing in markets small and large in virtually every part of the country that remains the main culprit.”

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30-year amortizations will only impact a ‘sliver’ of the housing market

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The Liberal government’s plan to allow some first-time homebuyers to stretch their mortgage amortizations to 30 years will only improve affordability for a “sliver” of the housing market, according to a BMO economist.

Finance Minister Chrystia Freeland announced Thursday that Ottawa would allow first-time buyers to take out an insured mortgage amortized over 30 years, up from the traditional 25, when purchasing a newly built unit.

The move, which takes effect Aug. 1, was pitched as a bid to give Canadians a leg up when breaking into Canada’s increasingly unaffordable housing market. Giving households a longer time to pay down the overall mortgage can mean paying more over time in interest, but reduces the monthly carrying costs on the loan.

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In a note to clients released Friday morning, BMO senior economist Robert Kavcic said the shift would improve a household’s buying power in these transactions by about eight per cent, given the standard five-year fixed-rate mortgage.

But Kavcic also said the actual impact of the policy shift would only hit a “small segment” of the market.


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Business News: Changes coming to mortgages in Canada?

 


First-time homebuyers account for less than half of all real estate transactions in a typical year, he noted, while insured mortgages make up around 15 per cent of all transactions these days.


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A mortgage is insured if a buyer puts down less than 20 per cent of the home’s purchase price upfront, or if the property’s value is greater than a million dollars. This boxes out even some starter properties in Canada’s most expensive housing markets of Toronto and Vancouver.

Kavcic said the policy could shift buyer demand towards new builds for a time, “but the overall market impact should be limited.”

“And that’s a good thing, as juicing demand is rarely the right prescription for a market already struggling with excess demand,” Kavcic wrote.

The Liberals’ policy shift was hailed by the Canadian Home Builders’ Association on Thursday, which had been calling for such a move to stimulate building in the sector.

In addition to the amortization changes, Freeland announced new rules for first-time buyers making withdrawals from their registered retirement savings plans via the Home Buyers’ Plan.

As of April 16, buyers will be able to take out up to $60,000, an increase from $35,000 previously, towards the purchase of their first home, and will have a total of five years, up from two, until they have to start repaying the withdrawal into their RRSP.


Click to play video: 'Business Matters: Mortgage stress test at renewal hinders competition, watchdog says'
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Business Matters: Mortgage stress test at renewal hinders competition, watchdog says


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