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In a disappointing turn of events for Shopify, its stock experienced a decline on Thursday after falling short of analyst expectations in several key areas for the March quarter. Alongside its underwhelming performance, the e-commerce giant also made a significant acquisition, purchasing fulfillment operator Deliverr for a substantial sum of $2.1 billion.
Shopify, headquartered in Canada, unveiled its first-quarter earnings early Thursday, which resulted in a 14.9% drop in the company’s stock, closing at 413.09.
Adjusted earnings for the quarter that ended on March 31 were reported at 20 cents per share, reflecting a drastic 90% decrease compared to the corresponding period of the previous year. Despite this decline, Shopify managed to achieve a 22% rise in revenue, reaching $1.2 billion.
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Shopify Stock: Tough Year-to-date Comparison
Unfortunately, this marks the fourth consecutive quarter of declining revenue growth for Shopify. Analysts had already lowered their expectations for the March quarter due to the waning effects of the COVID-19 pandemic and the subsequent normalization of e-commerce growth.
However, even with this anticipation, Shopify’s performance fell short of the predicted outcome.
Jefferies analyst Samad Samana expressed his views on Shopify’s Q1 performance, stating, “While investors prepared for the shortfall, especially after weakness at other e-commerce companies, Shopify’s Q1 still fell short of the bar.”
In an effort to enhance its capabilities, Shopify is actively expanding its distribution network within the United States, aiming to provide better storage and shipping solutions for its merchant customers. The acquisition of Deliverr, valued at $2.1 billion, was structured with 80% cash and 20% equity.
Truist analyst Terry Tillman mentioned in a client note that this deal is expected to contribute to revenue growth in 2022, slightly increasing the adjusted gross profit margin but proving dilutive to the adjusted operating margin.
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Shop Stock: Gross Merchandise Volume Light
Additionally, gross merchandise volume from merchant customers during the first quarter amounted to $43.2 billion, falling short of the estimated $45.84 billion. This, combined with the missed earnings and revenue targets, has led to a challenging year-to-date comparison for Shopify.
Despite the setbacks, Shopify remains a prominent player in the e-commerce industry and continues to innovate and adapt to the evolving market conditions.
