Breaking News: Shopify Tumbles After Costly Earnings Miss
Shares in e-commerce giant Shopify (SHOP) are sliding in today following the announcement of its first-quarter 2022 earnings. Down over 17% at the time of writing, Shopify posted adjusted earnings per share (EPS) of $0.20 on revenue of $120 billion. Analysts had expected figures of $0.64 and $1.24 billion respectively.
A first-quarter net loss of $1.5 billion is undoubtedly of particular note to shareholders, considering the company posted net income of $1.3 billion in the year-ago quarter. This quarter's poor performance can largely be attributed to both realized and unrealized losses on equity and other investments totaling $1.6 billion, with Shopify falling afoul of the same market realities that all investors are coming to terms with.
All is not hopeless, however. The company noted that this quarter had the unenviable task of being directly compared to its Q1 2021 results — the firm’s fastest ever growing quarter for revenue.
Shopify also announced the acquisition of fulfillment technology firm Deliverr in a bid to bolster its own fulfillment network. Chief Executive Tobi Lütke stated that “together with Deliverr, Shopify Fulfillment Network will give millions of growing businesses access to a simple, powerful logistics platform that will allow them to make their customers happy over and over again."
It’s also extremely important to note for investors that Shopify stock also slid following its last earnings report, despite beating on earnings and revenue. Remember to look for true changes in the underlying thesis of a company before contemplating any rash moves.
In order to get a greater insight into what this means for the long-term outlook for Shopify, we turned to MyWallSt Financial Analyst, Michael O’Mahony, for his thoughts.
“This report does not make for great reading from Shopify, although similar to Amazon's last week, it is skewed a little by a drop in value of some of its investments. This is far and away from the core business and so we can discount the huge loss figure. That being said, growth is slowing and with the stock's premium valuation in the current market, that's not going to cut it. There are some bright points, however, not least the Deliverr acquisition, which is a step forward in the build-out of Shopify's fulfillment network; a tactic that has brought great success to Amazon.
It's important not to look at this earnings in isolation too. E-commerce as a whole is feeling the heat. Amazon, Etsy, and eBay have all suffered this earnings season as economic pressures have put a grey cloud over the near future. Discretionary spending has tightened thanks to inflation, fulfillment costs have gone up thanks to fuel prices, and supply chain constraints are still a very real issue. Under these circumstances, it's no surprise the outlook is bleak. That being said, I can't see us going back to bricks and mortar shops anytime soon.
Shopify's recent downturn has been a tough pill to swallow for investors recently, however, it still remains the business it was when it was MyWallSt's top-performing stock. The current environment is tough right now, but I have no doubt it will pull through and continue to wrest away market share from Amazon at the top of the e-commerce food chain.”
Keep an eye on MyWallSt for any further developments in this story