Shopify (SHOP) reported strong first-quarter growth, with both earnings and revenue topping Wall Street analysts’ estimates. However, a weak outlook for the second quarter sent the shares of the Canadian e-commerce platform tumbling by almost 20 percent. This is a six-month low for the company. CWEB analyses that the platform is facing difficulties due to a disruptive economy and low consumer spending.
Shopify lost almost $18.21 billion during the Wednesday slump in stock. The Toronto-based company has many small to medium businesses that have suffered the most due to economic uncertainty and reduced discretionary spending.
Shopify reported $1.86 billion in revenue in the first quarter, topping analysts’ estimate of $1.85 billion. The e-commerce platform also reported earnings per share of 20 cents, which was higher than the 17 cents analysts had expected.
The marketplace also reported Subscription Solutions revenue of $511 million. This was an increase of 34 percent compared to the same quarter a year earlier. Price increases, as well as additional merchants joining the marketplace, increased the revenue.
On Wednesday, Shopify said that average growth in the second quarter would be in the teens. This dull outlook caused Shopify’s shares to fall by 20 percent, as the previous second quarters generally posted growth of about 26 percent.
The Canadian e-commerce marketplace also said that operating expenses would increase by a low-to-middle single-digit percentage in the second quarter. There was a 4 percent fall from January to March.
On a conference call with analysts, executives from Shopify said that they had “factored in headwinds related to [foreign exchange] from a strong U.S. dollar and some softness in European consumer spending in our Q2 outlook.”
Shopify has introduced artificial intelligence features for businesses on its marketplace. “Shopify Magic,” the AI tool, can automatically generate listings, edit images, and more. However, it has withdrawn from logistics. It fired 20 percent staff last May.
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