shares Shopify (NYSE: STORE) The company caught fire today after the pricey e-commerce stock posted strong first-quarter results, beating estimates, but investors dismissed its second-quarter outlook.
As a result, the stock was down 19.8% as of 10:39 a.m. ET on Wednesday.
Shopify comes up short
The e-commerce company posted strong results in the first quarter, but the stock price comes with high expectations from investors.
Revenue in the quarter jumped 23% — or 29% when adjusted for the sale of its Deliverr logistics business — to $1.86 billion, beating estimates of $1.84 billion. Growth was balanced as subscription solutions revenue rose 34% to $511 million, driven by new merchants joining the platform and subscription price increases. Commerce solutions, which include services such as payments, shipping and finance, rose 20% to $1.4 billion.
Gross merchandise volume (GMV) rose 23% to $60.9 billion, while gross payment volume improved 32% to $36.2 billion, from 56% to 60% of GMV.
On the bottom line, adjusted earnings per share (EPS) jumped from $0.01 to $0.20, beating estimates of $0.17.
Free cash flow margin in the quarter was also strong at 12%, although that number and adjusted EPS ignore stock-based compensation, which totaled $105 million in the quarter.
The outlook for the second quarter is disappointing
Shopify expects revenue growth to slow in the current quarter, and expects an increase in the high or low-to-mid 20% range, excluding the impact of the sale of Deliverr. It also called for a 50 basis point sequential decline in gross margin.
This revenue forecast was slightly worse than the analyst consensus, which raised concerns among investors because Shopify remains an expensive stock, with high price expectations.
The slowdown doesn't seem to be a cause for concern given the top line growth, but the stock's pullback seems warranted as Shopify is still trading at a high price Price to sales ratio From 14.
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Jeremy Bowman He has jobs at Shopify. The Motley Fool has posts on and recommends Shopify. The Motley Fool has Disclosure policy.
Why Shopify Stock Dropped Today Originally published by The Motley Fool