Shopify Stock Hit By Plethora Of Headwinds In Q1

Shopify’s Q1 2022 results

In the most recent quarter, Shopify’s growth slowed as GMV increased just 16% YoY, nearly half the 31% YoY growth rate the company reported in the prior quarter. Total sales increased 22% YoY to $1.2 billion, which was the slowest rate of growth since Shopify went public.

Deliverr

Shopify also announced the acquisition of Deliverr for $2 billion during the quarter. Even though it makes sense to add logistics software, the timing of this announcement was not great given Shopify’s low top line growth and weakness in the margins. Analysts have to digest that Shopify is spending another $2 billion on Shopify Fulfillment Network, while it was previously stated the company would spend $1 billion per year until 2024. It’s possible that we have not seen the end to the investment that will be required.

Amazon Could Become a Partner

Shopify management shrugged off concerns that Amazon was a competitor and reframed the company as a partner. Here is what was discussed on the earnings call:

Conclusion:

Shopify recently reported slowing growth, rising expenses and shrinking margins. Which is exactly why Shopify could very well be trading at its low as all negativity is probably priced in. The real question is whether Shopify can bounce back as quickly as peers with management teams who are providing more visibility? We won’t know for another three months how Shopify weathered Q2. Tech investors should always have a long-term horizon or the gains will not outweigh the losses, that is a fact, because timing is nearly impossible given the volatility in this sector. If you don’t have long-term horizon, you’ll end up selling at the low. While many are panicked over losses right now, the more common problem that tech investors face is closing winners too soon. I believe Shopify was quite clear on the horizon required for Shopify investors to see a meaningful return, which will be around the time Shopify Fulfillment Network begins to scale in 2023/2024.

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Beth Kindig

Beth Kindig

CEO and Lead Tech Analyst for the I/O Fund with cumulative audited results of 141%, beating Ark and other leading active tech funds over four audit periods in 2