Actions of Shopify (NYSE: SHOP) were torched today after the high-priced e-commerce stock posted strong first-quarter results, beating estimates, but investors were hesitant about its second-quarter prospects.
As a result, the stock was down 19.8% as of 10:39 a.m. ET on Wednesday.
Shopify fails
The e-commerce company posted strong first-quarter results, but the stock price has high expectations from investors.
Revenue for the quarter jumped 23% – or 29% after adjusting for the sale of its Deliverr logistics business – to $1.86 billion, which beat estimates of $1.84 billion. Growth was balanced as subscription solutions revenue increased 34% to $511 million, driven by new merchants joining the platform and increasing subscription prices. Merchant solutions, which include services such as payments, shipping and financing, grew 20% to $1.4 billion.
Gross merchandise volume (GMV) increased 23% to $60.9 billion, while gross payments volume improved 32% to $36.2 billion, from 56% to 60%. of the GMV.
Ultimately, adjusted earnings per share (EPS) rose from $0.01 to $0.20, beating estimates of $0.17.
Free cash flow margin during the quarter was also strong at 12%, although this figure and adjusted EPS ignore stock-based compensation, which totaled $105 million during the quarter.
Second quarter outlook is disappointing
Shopify expects revenue growth to slow in the current quarter, forecasting an increase in the range of 15% or 20%, excluding the impact of the Deliverr sale. It also called for a sequential decline in its gross margin of 50 basis points.
That revenue forecast was slightly worse than analyst consensus, spooking investors as Shopify remains an expensive stock, with high expectations built into the price.
The slowdown doesn’t seem alarming given the revenue growth, but a pullback in the stock seems justified as Shopify still trades at a high price. price/sales ratio of the 14th.
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Jeremy Bowman has positions in Shopify. The Motley Fool posts and recommends Shopify. The Mad Motley has a disclosure policy.
