Shopify Shares plunged 18% on Wednesday, shaving nearly $20 billion off the corporate's value gave Sales and profit forecasts for the present quarter that spooked investors.
Here's how the corporate performed in the primary quarter in comparison with LSEG's consensus expectations:
- Earnings per share: 20 cents adjusted versus 17 cents expected
- Revenue: $1.86 billion versus expected $1.85 billion
Better-than-expected first-quarter results were overshadowed by Shopify's outlook for the present quarter. The Canadian e-commerce company said it expects second-quarter sales to grow by a high-teens percentage 12 months over 12 months, according to consensus estimates for 19.5% growth, but still a slowdown from the last quarters. Shopify has reported annual revenue growth within the low to mid-20s over the past six quarters.
In a conference call with analysts, Shopify executives said U.S. consumer spending remained strong, “but we have factored in headwinds related to that.” [foreign exchange] attributable to the strong U.S. dollar and a few moderation in European consumer spending in our second quarter outlook.”
Due to the sale of Shopify's logistics business to shipper Flexport last May, gross margins within the second quarter are expected to say no by about 50 basis points in comparison with the primary quarter. Meanwhile, Shopify said it expects operating costs to rise within the low to mid-single digits quarter-on-quarter, while Wall Street had forecast flat growth.
Baird analysts said in a note to clients Wednesday morning that the guidance for higher operating costs “clouds an otherwise solid Q1 report as the company likely relies on marketing and R&D (AI/GenAI) investments.”
Shopify, which makes tools for businesses to sell products online, has been constructing out its artificial intelligence capabilities for businesses in recent quarters, including “Shopify Magic,” which might robotically create listings and edit images, amongst other things. Rivals including Amazon, Etsy And eBay have also introduced AI features for sellers on their platforms.
“With no clear positive impact on [gross merchandise volume] “And the proceeds from recent investments will make investors question margin performance, which will revalue the stock somewhat,” Baird analysts wrote. They have an Outperform rating on Shopify stock.
While Shopify has invested in AI, it has pulled back in other areas corresponding to logistics services. Last May, the corporate laid off 20% of its workforce because it handled a post-pandemic slump in e-commerce.
Shopify President Harley Finkelstein said in an interview with CNBC's “Squawk on the Street” that the corporate is “focused on the long term.”
“We want to be able to make these investments for the future, which is why we provided the guidance that we created,” Finkelstein said.
The company reported a net lack of $273 million, or 21 cents per share, compared with a profit of $68 million, or 5 cents per share, within the year-ago quarter.
According to Shopify, gross merchandise volume, or the full volume of products sold on the platform, increased 23% to $60.9 billion. According to StreetAccount, this beat consensus expectations of $59.5 billion.
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