Shopify is now the worst company in the market
Yes, you heard it here first, Shopify just became the worst company in the market. Now you know this is sarcastic, but dropping 20% on earnings that beat both on top, and bottom line requires some effort. Sources used for this article can be found below.
Before looking for an explanation for the drop, let’s first look at the earnings.
- Gross merchandise Volume (GMV) was up 23%
- Revenue was up 23%, and 29% when adjusted for the sale of the logistics business
- Merchant Solutions Revenue increased by 20%
- Gross Payment Volume (GPV) grew to 60% of GMV, compared to 56% in Q1’23.
- Gross Profit grew 33%, with gross margin at 51.4%, compared to 57.5% for Q1’23. The increase came from the lack of dilutive effects from the logistics business, and changes in pricing from standard plans, but were slightly offset by continued growth in Shopify Payments.
- Free Cash Flow was 232 million compared to 86 million in Q1’23
- Free Cash Flow Margin of 12%, compared to 6% in Q1’23
So what happened?
Well, as top, and bottom line both beat, there is one more important number that can miss, and it did. Slightly. The CFO, Jeff Hoffmeister warned that macro-economic signs point towards softness in Europe, especially in the UK, as it is expected to show in Q2 numbers. The company sees revenue growth in Q2 increase in the high-teens rate year-over-year, as analyst consensus estimate was 19.73%. As Jim Cramer put it, “Shopify was a beat and raise company, now it only beats”. It was said with a sarcastic undertone but it’s true, guidance did not miss but that much to lose 20% was it not for the huge valuation the stock carried.
And one more thing, Shopify reported a net loss for the quarter of USD273 million, this came from one time expenses, mainly from the net loss on equity and other investments.
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Source 1, Dow Jones Newswire
Source 2, Seeking Alpha
Source 3, Shopify Earnings PR
