Shopify experienced its biggest daily loss on the stock market on Wednesday after the company forecasted a slowdown in revenue growth and slimmer margins for the current quarter. Despite a better-than-expected first quarter, shares fell by 19% to $62.73, the largest daily decline in the company's history. At the start of trading, the shares had even fallen by up to 21%.
The Ottawa-based company, which provides infrastructure for online merchants, now expects revenue to increase by a high teen percentage in the current quarter, which would represent the slowest growth in its history. In the first quarter, revenue increased by 23%. In both quarters, the sale of the logistics business last year had a dampening effect.
According to Chief Financial Officer Jeff Hoffmeister, Shopify expects headwinds due to weaker spending in Europe and a stronger US dollar, although US consumers remain resilient. In addition, margins are expected to decline, partly due to higher marketing expenses in the current quarter.
In the first quarter, Shopify recorded a loss of $273 million or 21 cents per share, compared to a profit of $68 million or 5 cents per share in the same quarter of the previous year. On an adjusted basis, which excludes extraordinary and one-time items, the profit was 20 cents per share, exceeding analyst estimates of 17 cents per share.
Revenue was at $1.86 billion, thus slightly above the analysts' forecasts of $1.84 billion. The growth of gross merchandise volume, which measures the total value of orders processed on Shopify's platform, increased by 23% in the last quarter.
The monthly recurring revenues measuring the company's predictable monthly income increased by 32% to 151 million US dollars at the end of the quarter. This was driven by growth across all of Shopify's subscription plans, with Shopify Plus, the more advanced version of the platform for merchants, contributing 48 million US dollars or 32% of the total amount.
The gross margin increased to 51.4% from 47.5% in the previous year, supported by the sale of the logistics business and some price changes. However, the company expects that the margins will decline from this level in the second quarter, as operating expenses are set to rise in the low to mid-single digit range.
