E-commerce firm Shopify on Wednesday reported a loss for the June quarter while revenue and gross merchandise volume missed estimates. But SHOP stock jumped amid speculation Cathie Wood's ARK Investment stepped in to buy shares.
Shares in Canada-based Shopify surged 11.7% to close at 35.24 on the stock market today. Even so, Shopify stock is down 74% in 2022.
At Evercore ISI, analyst Mark Mahaney says headwinds on SHOP stock will ease.
SHOP Stock: E-Commerce Trends
"SHOP is leaning into investment spend this year in marketing and product development and does have a dilutive acquisition with fulfilment company Deliverr," he said in a report to clients.
"But we view these investments as strengthening SHOP's value proposition. 2022 is now a 'transition year,' but we believe macro headwinds will eventually abate and SHOP's growth rate will reaccelerate as they do and as e-commerce finishes reverting to trend-line," Mahaney went on to say.
Shopify Chief Executive Tobi Lütke on Tuesday took responsibility for a flawed strategy amid the coronavirus pandemic. The company disclosed plans to cut 10% of its workforce.
Shopify reported second-quarter earnings before the market open on Wednesday. For the quarter ending June 30, Shopify said it lost 3 cents per share on an adjusted basis.
Revenue for SHOP stock rose 16% to $1.295 billion, the company said. Revenue growth decelerated for a fifth-straight quarter as the coronavirus pandemic fades and online shopping normalizes.
Shopify Stock: Gross Merchandise Volume Light
Analysts expected Shopify earnings of 3 cents a share on revenue of $1.33 billion. A year earlier, Shopify earned 22 cents per share on revenue of $1.12 million.
Gross merchandise volume from merchant customers came in at $46.9 billion vs. estimates of $48.84 billion.
"Shopify expects the Q3 loss to be materially higher than Q2 but expects Q4 to sit in the middle of the two quarters as expense growth slows sharply," Jefferies analyst Samad Samana said in his note to clients. "We believe the layoffs and management commentary signal that SHOP is increasingly focusing on profitable growth, a change we think investors will appreciate."
SHOP stock tumbled 14% on Tuesday. Prior to Wednesday, Shopify stock had declined more than 70% in 2022.
Merchant Solutions Sales Up 18%
In the June quarter, Shopify said merchant solutions revenue rose 18% to $929 million. Subscription solutions revenue climbed 10% to $366.4 million. Analysts had projected merchant solutions revenue of $968.2 million and subscription solutions revenue of $361.6 million.
Shopify sets up e-commerce websites for small businesses, and partners with others to handle digital payments and shipping.
The e-commerce firm on Tuesday said it will cut roughly 1,000 workers, or 10% of its workforce.
"The company expects to generate an adjusted operating loss in the back half of 2022, inclusive of a 10% reduction in headcount," Truist Securities analyst Terry Tillman said in a report.
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