Shopify shares take a pounding as it falls short of profit estimate
E-commerce stocks have been hammered this earnings season on concern that online shopping is slowing as the Covid-19 pandemic fades
Shopify’s share price fell as much as 16% after it missed analysts’ estimates for revenue and profit and announced its largest acquisition, a $2.1bn deal for delivery startup Deliverr.
The Canadian e-commerce software firm earned 20c per share on an adjusted basis in the first quarter, short of analyst calls for 64 cents. Revenue rose 22% to $1.2bn from a year earlier but couldn’t match analyst expectations of $1.25bn, according to data compiled by Bloomberg.
The share price was down 13% to $423.50 in premarket trade shortly after 8am in New York. It is down nearly 70% this year.
E-commerce stocks have been pummelled in this earnings season on concern that online shopping is slowing as the Covid-19 pandemic fades. Amazon.com had its biggest one-day drop since July 2006 after it reported a weaker-than-expected revenue forecast. Wayfair, Etsy and eBay all dropped in premarket trading on Thursday.
Gross merchandise volume, the value of merchant sales flowing through Shopify’s platform, grew 16% in the first quarter from a year earlier to $43.2bn. Analysts, on average, expected $46.5bn.
Shopify also said it reached a deal to acquire Deliverr to expand in fulfilment services, confirming an April 20 report by Bloomberg News. In January, Shopify cancelled several fulfilment and warehouse contracts as it intended to create its own distribution network.
The deal with Deliverr — which provides two-day delivery services for companies including Amazon, eBay, Etsy and Walmart — more than doubles the size of Shopify’s fulfilment team. The transaction will be financed using 80% cash and 20% Shopify Class A shares.
“Being able to offer a delivery promise and fast fulfilment across all these channels boosts conversion,” said CFO Amy Shapero.
“We are confident Deliverr’s ability to simplify the process, and arm merchants with visibility and control from the display of a delivery promise across multiple channels through its completion, will be a huge benefit to our merchants.”
Shopify has had a rough start to the year. A parade of analysts slashed the company’s price target ahead of its earnings announcement. In a bid to draw retail investors, Shopify announced plans in April to split its stock 10-for-1.
The company is also seeking to make governance changes that would give CEO Tobi Lutke a special “founder share” that will preserve his voting power as long as he’s at the company, under certain conditions.
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