Shopify on Wednesday reported first-quarter earnings that topped analyst estimates while revenue edged by views. Shopify stock plunged on the e-commerce firm's revenue and profit margin guidance for the current June quarter.
Released before the market open, Shopify earnings for the quarter ending March 31 were 20 cents on an adjusted basis.
On the stock market today, Shopify stock plunged 18.6% to close at 62.73.
"Q2 included slightly lower revenue expectations vs. the street and slightly higher operating expense dynamics; hence the negative stock reaction," said Truist Securities analyst Terry Tillman in a report.
Management cited costs related to an in-person Summit conference as well as additional marketing spend for the higher Q2 operating expenses.
Meanwhile, recent price hikes have yet to produce an expected revenue boost, analysts said.
Analysts polled by Visible Alpha predicted profit of 16 cents, up from 1-cent in the year earlier period.
Revenue climbed 23% to $1.9 billion versus estimates of $1.843 billion.
Further, Shopify said Q1 gross merchandise volume from merchant transactions rose 23% to $60.9 billion vs. estimates of $59.67 billion.
Shopify Stock Guidance
Merchant solutions revenue rose 20% to $1.4 billion vs. estimates of $1.34 billion. Subscription revenue rose 34% to $511 million versus estimates of $499.3 million.
In Q1, gross margin came in at 51.4%, up from 47.5% a year earlier. But the trajectory of Shopify's operating expenses remains an issue on Wall Street.
In Q1, adjusted operating margins were 10.8%, topping estimates of 10.2%.
"Overall, we think Shopify's business momentum is solid, but we do not see the stock moving higher without a path to 18% to 20% operating margins, said Jefferies analyst Samad Samana in a report.
Heading into the Shopify earnings report, shares were up 2% in 2024 and 26% from a year ago.
Revenue, Margin Outlook
For the current June quarter, Shopify said it expects: "Revenue to grow at a high-teens percentage rate on a year-over-year basis, which translates into a year-over-year growth rate in the low-to-mid-twenties when adjusting for the 300 to 400 (3% to 4%) basis points impact from the sale of our logistics businesses. Gross margin for Q2 is expected to decrease by approximately 50 basis points compared to Q1 2024."
For the June quarter, analysts estimated $2.025 billion in revenue and $65.46 billion in GMV for SHOP stock.
The company in 2023 sold its delivery and logistics business to Flexport, easing Wall Street worries over rising capital spending.
Shopify sets up e-commerce websites for small businesses, and partners with others to handle digital payments and shipping.
Meanwhile, SHOP stock holds 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.
