Shopify Is Down By 17%, Here Is Why
- Shopify’s first-quarter report missed analyst estimates on both earnings and revenue.
- The company announced that it would buy Deliverr for $2.1 billion.
- Shopify stock remains expensive even after the huge pullback from November highs.
Shopify Stock Falls After Disappointing Q1 Report
Shares of Shopify gained strong downside momentum after the company released its first-quarter results. The company reported revenue of $1.2 billion and adjusted earnings of $0.20 per share, missing analyst estimates on both earnings and revenue.
Shopify has also announced that it planned to acquire e-commerce fulfillment technology provider Deliverr. The transaction is valued at approximaterly $2.1 billion, including 80% in cash and 20% in Shopify Class A voting shares.
The earnings miss and the Deliverr acquisition have served as bearish catalysts for Shopify stock, which moved towards the $400 level. Back in November 2021, Shopify touched highs near $1763, so the stock has already lost more than 75% of its value.
What’s Next For Shopify Stock?
Analysts expect that Shopify will report earnings of $4.06 per share in the current year and $6.32 per share in the next year, so the stock is trading at 63 forward P/E, which is expensive.
Analysts estimates have been moving lower in recent months, and this trend will likely remain intact after the release of the first-quarter report.
The company remains expensive even after a huge pullback, and it remains to be seen whether speculative traders will be ready to buy the stock in the rising interest rate environment. Today, the yield of 30-year Treasuries moved towards 3.15%, a level that was last seen back in 2019.
Shopify’s current valuation is the reason why the market did not like the deal with Deliverr. Put simply, traders are moving out of growth stocks due to rising interest rates, so such a purchase from a high-PE company is viewed as a negative catalyst.
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