Shopify Stock: Shopify Earnings Top Views. E-commerce giant plummets in Outlook

Shopify (SHOP) on Wednesday reported first-quarter earnings that beat analyst estimates, while revenue beat views. Shopify shares plunged on the e-commerce company’s revenue and profit margin guidance for the current June quarter.

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Released before the market opened, Shopify’s profit for the quarter ended March 31 was 20 cents on an adjusted basis.

In the stock market today, Shopify shares plunged 18.6% to close at 62.73.

“The second quarter included slightly lower revenue expectations relative to the Street and slightly higher operating expense dynamics; hence the negative stock reaction,” Truist Securities analyst Terry Tillman said in a report.

Management cited costs related to an in-person Summit conference as well as additional marketing spending for the second quarter’s higher operating expenses.

Meanwhile, recent price increases have not yet produced the expected increase in revenues, analysts said.

Analysts polled by Visible Alpha predicted profit of 16 cents, up from 1 cent in the year-earlier period.

Revenue increased 23% to $1.9 billion, versus estimates of $1.843 billion.

Additionally, Shopify said gross merchandise volume from commerce transactions in the first quarter increased 23% to $60.9 billion, versus estimates of $59.67 billion.

Shopify Inventory Guidance

Merchant solutions revenue increased 20% to $1.4 billion versus estimates of $1.34 billion. Subscription revenue increased 34% to $511 million versus estimates of $499.3 million.

In the first quarter, gross margin was 51.4%, up from 47.5% in the previous year. But Shopify’s operating expense trajectory continues to be an issue on Wall Street.

In the first quarter, adjusted operating margins were 10.8%, exceeding estimates of 10.2%.

“Overall, we believe Shopify’s business momentum is solid, but we don’t see the stock moving higher without a path to 18% to 20% operating margins,” Jefferies analyst Samad Samana said in a report.

Going into Shopify’s earnings report, shares are up 2% for 2024 and 26% year-over-year.

Revenue, Margin Outlook

For the current June quarter, Shopify said it expects: “Revenue will grow at a high-teens percentage rate year-over-year, which translates to a year-over-year growth rate in the low to mid-range. twenty years when adjusting the impact of 300 to 400 (3% to 4%) basis points from the sale of our logistics business is expected to decrease by approximately 50 basis points compared to the first quarter of 2024.”

For the June quarter, analysts estimated $2.025 billion in revenue and $65.46 billion in GMV for SHOP shares.

The company sold its delivery and logistics business to Flexport in 2023, easing Wall Street concerns about rising capital spending.

Shopify creates e-commerce sites for small businesses and partners with others to handle digital payments and shipping.

Meanwhile, SHOP stock has a relative strength rating of 77 out of a best possible 99, according to IBD Stock Check-up.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity, and cloud computing.

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