Shopify stock plunges to worst day on record after earnings
Shares of Shopify Inc. fell to their worst day on record on Wednesday, after the e-commerce company beat expectations with its most recent results, but signaled that its growth could slow as some advantages of the era of the pandemic would subside.
While Shopify CFO Amy Shapero believes the pandemic has helped drive significant behavioral changes around e-commerce, she also expects “a more measured macro environment compared to 2021.” Shapero provides that Shopify SHOP,
will still experience “rapid” growth in 2022, but at lower rates than in 2021.
“While we believe the COVID-triggered e-commerce acceleration that spread in the first half of 2021 in the form of lockdowns and government stimulus measures will be absent from 2022 and there is caution regarding inflation and near-term consumer spending, for the full year we see economic growth supporting continued e-commerce retail penetration,” she said on the call for company results Wednesday morning.
Shares were down 18.1% by midday and are on track for their biggest single-day percentage decline on record, according to Dow Jones Market Data. Shopify’s stock is down 56.5% in the past three months as the S&P 500 SPX,
Shopify also indicated that it plans to invest more in execution as efforts move from a “build” phase to a “prototype” phase, according to Shapero. The company aims to simplify the fulfillment experience for merchants and conducted a pilot project with a self-contained warehouse in Atlanta.
A large fulfillment network promises more opportunities for perks like one-day and two-day shipping, but it also requires investment. Shopify expects fulfillment spending to “start increasing in 2022” and it also now forecasts that it will see around $1 billion in capital spending in 2023 and 2024 related to warehouse centers.
The company faced several questions on the earnings call regarding its execution plans, including the company’s decision to operate more of its fulfillment centers itself.
“It’s not like it’s wholly owned by Shopify, but we want to match Shopify warehouses with partner warehouses, and we expect quality to increase and capacity to increase due to this change,” the president said. Harley Finkelstein during the earnings call. .
For the latest quarter, Shopify increased revenue to $1.38 billion from $978 million a year earlier, while analysts polled by FactSet expected $1.34 billion.
The company reported a fourth-quarter net loss of $371.3 million, or $2.95 per share, compared to net income of $123.9 million, or 99 cents per share, in the year-ago quarter former. Shopify’s net loss figure last quarter reflects an unrealized net loss of $509.7 million on investments.
Shopify beat consensus expectations for adjusted earnings per share for the fourth quarter at $1.36, while analysts were looking for $1.30. The company generated $1.58 of adjusted EPS a year ago.