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Investors React As Shopify (SHOP) Stock Drops After Earnings
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Shares of Shopify (SHOP - Free Report) were down more than 10% in early morning trading Tuesday, shortly after the e-commerce solutions company filed its latest quarterly earnings report. Shopify managed to surpass expectations on the top and bottom line, but the results were not enough to ease valuation- and balance sheet-related concerns.
For the first quarter, Shopify posted adjusted earnings of 4 cents per share, crushing the Zacks Consensus Estimate of a 5 cent loss and improving 200% from the year-ago period. Meanwhile, total revenue was up more than 68% to touch $214 million, which comfortably beat our consensus estimate of $202 million.
Investors appear concerned about a slowdown in gross merchant volume (GMV) growth. This measurement, which considers the total amount of goods sold on Shopify-based stores, grew 64% from the prior-year quarter, compared with an 81% improvement in the same quarter last year.
For Shopify bulls, the company’s revenue growth is the real story, confirming the thesis that the its sales will simply snowball as more people join the platform. From this perspective, a slight slowdown in GMV growth is not necessarily concerning and certainly does not reflect a widespread abandonment of the service.
But Shopify bears—including famed short seller Citron Research—believe that its stores are get-rich-quick schemes, with the company’s growth tied to small merchants who quickly leave only to be replaced by others. This implies that Shopify will hit a snag once it cycles through enough people.
Citron has been very public in its bearishness toward Shopify recently:
$SHOP in Trump's crosshairs. A Canadian co whose growth is based on inefficiencies in "Chinese imports" and USPS pricing. USPS and Hongkongpost deal first to go Worse, they brag about it "Lower cost than dom first-class serv from the USPS" More detail Monday $SHOP back to $90
But the company still attracts a loyal following of investors who believe it can be the next great growth stock in the technology sector, and despite the stock’s massive slump in early morning trading, the prevailing sentiment in the “Fintwit” universe was belief:
Why is Shopify down 5% #premarket? $SHOP beat on earnings and sales and raised its outlook. What am I missing?
I love when people use the argument of a balance sheet for some companies as if they have ever run a business themselves. Most companies aren’t cash flow positive off the bat... $shop has been trading at a multi-billion dollar market cap for years without being cash flow positive
Shopify is a polarizing company with a legion of loyal followers and a passionate group of disbelievers. Both of these sides have the ability to voice their opinions on social media, and long-term, buy-and-hold bulls might still be right about the stock. However, based on Tuesday’s early price action, it looks like the post-earnings sellers are winning out so far.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Investors React As Shopify (SHOP) Stock Drops After Earnings
Shares of Shopify (SHOP - Free Report) were down more than 10% in early morning trading Tuesday, shortly after the e-commerce solutions company filed its latest quarterly earnings report. Shopify managed to surpass expectations on the top and bottom line, but the results were not enough to ease valuation- and balance sheet-related concerns.
For the first quarter, Shopify posted adjusted earnings of 4 cents per share, crushing the Zacks Consensus Estimate of a 5 cent loss and improving 200% from the year-ago period. Meanwhile, total revenue was up more than 68% to touch $214 million, which comfortably beat our consensus estimate of $202 million.
Investors appear concerned about a slowdown in gross merchant volume (GMV) growth. This measurement, which considers the total amount of goods sold on Shopify-based stores, grew 64% from the prior-year quarter, compared with an 81% improvement in the same quarter last year.
For Shopify bulls, the company’s revenue growth is the real story, confirming the thesis that the its sales will simply snowball as more people join the platform. From this perspective, a slight slowdown in GMV growth is not necessarily concerning and certainly does not reflect a widespread abandonment of the service.
But Shopify bears—including famed short seller Citron Research—believe that its stores are get-rich-quick schemes, with the company’s growth tied to small merchants who quickly leave only to be replaced by others. This implies that Shopify will hit a snag once it cycles through enough people.
Citron has been very public in its bearishness toward Shopify recently:
But the company still attracts a loyal following of investors who believe it can be the next great growth stock in the technology sector, and despite the stock’s massive slump in early morning trading, the prevailing sentiment in the “Fintwit” universe was belief:
Bottom Line
Shopify is a polarizing company with a legion of loyal followers and a passionate group of disbelievers. Both of these sides have the ability to voice their opinions on social media, and long-term, buy-and-hold bulls might still be right about the stock. However, based on Tuesday’s early price action, it looks like the post-earnings sellers are winning out so far.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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