Shopify Stock Sinks After Earnings. Covid Gave, and Now It’s Taking Away.

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Shopify said it plans to acquire fulfillment technology provider Deliverr for about $2.1 billion.

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First-quarter earnings missed analysts’ expectations, sending the stock plummeting on Thursday.

The e-commerce company reported adjusted earnings of 20 cents a share during the quarter, below estimates for 64 cents a share. Net income was $25.1 million, down from $254.1 million from the same period last year.

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Shopify (ticker: SHOP ) posted sales of $1.2 billion, in line with estimates for $1.24 billion. Gross merchandise volume grew by 16% year over year to $43.2 billion. Revenue for the company’s Merchant Solutions segment was up 29% year over year, driven by uptake of solutions such as Shopify Payments, Shopify Capital, and Shopify Markets.

The company also announced it planned to acquire fulfillment technology provider Deliverer for about $2.1 billion, the largest acquisition in Shopify’s history, consisting of approximately 80% in cash and 20% in Shopify Class A shares. The transaction will be dilutive to operating margins this year, Shopify said.

The company is expecting year-over-year revenue growth to be lower in the first half and highest in the fourth quarter of 2022, “as the Covid-triggered acceleration of e-commerce in the first half of 2021 from lockdowns and government stimulus is absent from the first half of 2022,” the company said.

Merchant solutions revenue growth could be more than twice the rate of subscription solutions growth year, meaning gross profit dollar growth will trail revenue growth, the company said. Shopify plans to reinvest all gross profit dollars back into the business to expand services, the company added. Capital expenditures will be about $200 million, while stock-based compensation expenses and related payroll taxes will be about $800 million.

Investors were jittery coming into Shopify’s earnings, given the mixed results other online retailers have posted this earnings season. Amazon (AMZN) stock tanked after it reported that online sales had declined this quarter, sending ripple waves across the sector.

Ahead of the earnings report, Wedbush analyst Ygal Arounian cut his price target to $630 from $937.

“Shopify likely hasn’t been immune to the e-commerce cross currents and pressures we are seeing around the space, but we continue to see it as well-positioned,” Arounian wrote on Tuesday.

Shares of Shopify were down 18% on Thursday. The earnings whiff was dragging down other e-commerce platforms, including Etsy ( ETSY ), which was down 15%, and eBay ( EBAY ), down 6.7%. Both companies reported earnings on Wednesday afternoon, forecasting less revenue than expected for the June quarter.

Write to Sabrina Escobar at [email protected]


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