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Shopify’s Stock Plummets 19% After Earnings Report
May 8, 2024
Shopify, the Canadian e-commerce company, faced a significant 19% drop in its stock value after releasing its first-quarter results. While it exceeded expectations in terms of revenue and earnings per share, its projection for the second quarter disappointed investors.
In the first quarter, Shopify reported an adjusted earnings per share of 20 cents, surpassing the expected 17 cents. Its revenue stood at $1.86 billion, slightly higher than the anticipated $1.85 billion. Despite these positive results, the company’s outlook for the current quarter hinted at a slowdown in growth.
Shopify expects second-quarter revenue to grow at a “high-teens percentage rate” year over year, which aligns with the consensus estimates but represents a deceleration compared to previous quarters. Over the past six quarters, the company had consistently achieved revenue growth in the low-to-mid 20s.
During a conference call with analysts, Shopify executives cited factors such as foreign exchange headwinds and softness in European consumer spending as challenges for the second quarter. Additionally, the sale of Shopify’s logistics business to Flexport last May is anticipated to impact gross margins negatively.
Despite its investments in AI features, such as “Shopify Magic,” which automates tasks for businesses, Shopify’s stock faced scrutiny from investors regarding the lack of clear positive impacts on gross merchandise volume and revenues.
While Shopify remains focused on long-term growth and investments, it has undergone strategic shifts, including layoffs and pulling back from certain services like logistics, in response to changing market conditions, particularly in the wake of the pandemic.
The company reported a net loss of $273 million for the quarter, a significant contrast to the profit of $68 million during the same period the previous year. However, its gross merchandise volume increased by 23% to $60.9 billion, surpassing expectations.
Shopify’s recent performance highlights both strengths and challenges in its path forward, prompting investors to closely monitor its strategic decisions and market response in the coming quarters.
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