Shopify Inc. Stock Dives 20% on Forecast of Slower Sales Growth


Shares of Shopify Inc. (NYSE:SHOP) experienced a sharp decline, dropping over 20% in early trading on the Toronto Stock Exchange on Wednesday. This steep fall followed the e-commerce platform’s forecast of decelerating sales growth and a slight contraction in gross margins for the second quarter.

Despite strong first-quarter results announced on Wednesday, Shopify anticipates a slowdown in consumer spending in North America. The company projects its second-quarter sales to increase at a rate in the high teens percentage year-over-year, a dip from its recent quarterly growth rate of approximately 26%. This projected growth, the slowest in two years according to Reuters, also accounts for the sale of its logistics business to Flexport.

In addition, Shopify expects a decline in gross margins by around 50 basis points for the upcoming quarter. During an earnings call, Shopify’s CFO, Jeff Hoffmeister, attributed the anticipated slowdown primarily to the company cycling past the quarter when it implemented significant price increases on its service plans. Last April, Shopify raised the prices of its Basic, Shopify, and Advanced plans, marking its first major price adjustment in twelve years.

Hoffmeister remarked that these price hikes would offer “a smaller combined benefit” in the current quarter, consequently posing a challenge to sequential revenue growth. Nevertheless, he expressed confidence in the company’s innovative products and market strategies that continue to propel Shopify as a frontrunner in unified commerce.

For the first quarter ending March 31, Shopify reported revenues of $1.86 billion, an increase from $1.51 billion in the prior year’s corresponding period. However, the company recorded a net loss of $273 million, or 21 U.S. cents per diluted share, in stark contrast to the profit of $68 million, or five U.S. cents per diluted share, reported last year.

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