Shopify Stock Swoons After Earnings Miss, Deliverr Acquisition
Shopify Inc. could be its own hardest act to follow.
The e-commerce ecosystem posted continued gains in the first quarter — but saw its stock drop sharply as earnings fell short of Wall Street estimates and investors digested a $2.1 billion deal to buy fulfillment technology firm Deliverr.
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Shares of the company fell 14.9 percent to $413.09 on Thursday, a decline that stood out even on a day when the S&P 500 dropped 3.6 percent as investors weighed the impact of high interest rates.
But Shopify’s management painted a more bullish picture of the company, with president Harley Finkelstein telling analysts on a conference call that the company, which gained as consumers turned to the web during the pandemic, was now poised to win again as they migrate back to brick-and-mortar.
“Throughout the last two years, we showed up for our merchants when they needed us most, and now the trust we built with them throughout the pandemic with our platform is being rewarded with more of their business. This momentum encourages us to continue to invest for the long term,” Finkelstein said.
“The more hard problems we solve for merchants, the more energy we add to our flywheel and the better off commerce is for everyone for years to come. As we start to put the pandemic behind us, there is yet another shift happening in commerce, and the good news is Shopify is again on the right side of that change.”
While the post-Omicron landscape has seen people go out more freely, it has also seen them, to some degree, log off.
“While this new mobility moderated the explosive growth in online activity that we’ve seen over the last couple of years, it drove home the importance of commerce everywhere: online, in-app and in real life,” Finklestein said.
“The hundreds of thousands of businesses that shifted their business to Shopify during the pandemic and stayed with us since can now take advantage of our powerful retail point-of-sale offering for a unified view of their sales online and offline,” he said.
The shift of momentum from the still-growing digital space to brick-and-mortar has been a difficult one to manage even for the digital giants, Amazon, which last week posted a big loss for the quarter.
But sentiment aside, Shopify is still growing sharply.
The company’s first-quarter sales grew 22 percent to $1.2 billion, representing a two-year compound annual growth rate of 60 percent.
The platform, which provides brands and retailers with a host of e-commerce services, drove gross merchandise volume of $43.2 billion for the quarter.
But analysts were looking for more of that growth to drop to the bottom line.
Shopify’s net losses for the quarter tallied $1.5 billion, or $11.70 a share. On an adjusted basis, that totaled income of 20 cents a share, far short of the 88 cents analysts anticipated.
Amid it all, Shopify is spending — Deliverr counts as its largest acquisition to date — to strengthen its fulfillment network.
“The great part about Deliverr is that it accelerates what we’ve been planning to do with this end-to-end logistics network,” Finkelstein said. “It gets there faster. And the fact that they have a great experience, they have great software, great talent and scale means that we can give more of our merchants more control, more full visibility. And of course, they can own the relationship with the end consumer.”
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