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News

‘Our value proposition is unparalleled’: Shopify stays on message as market rout deepens

Shopify president Harley Finkelstein made the rounds of the cable investing shows Thursday and Friday after the firm posted earnings that deepened its rout in the markets.

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‘Our value proposition is unparalleled’: Shopify stays on message as market rout deepens

By Murad Hemmadi
Shopify president Harley Finkelstein appeared on CNBC’s Mad Money Thursday, May 5, 2022 after his company’s first-quarter earnings disappointed the markets. Photo: CNBC Television via YouTube
May 6, 2022
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Shopify president Harley Finkelstein made the rounds of the cable investing shows Thursday and Friday after the firm posted earnings that deepened its rout in the markets.

“The macro environment is difficult, but a company that can be a COVID success story, that can then transition to a recovery story—those are the companies to bet on,” he told Mad Money host Jim Cramer Thursday. Finkelstein has frequently featured on CNBC’s fevered, prop-toting ode to stock-picking. “I think Shopify is unequivocally one of those companies.” 

On Thursday morning’s earnings call, executives said inflation and the post-Omicron re-opening had dragged on its clients’ sales, to which its revenue is closely tied.

On BNN Bloomberg’s early show Friday, Finkelstein tried to turn the spotlight to the company’s sunnier two-year compound growth figures for revenue and gross merchandise volume. “When you think about the environment that we’re in right now, which very much is inflationary, our value proposition is unparalleled,” he said, citing the growth of Shopify’s take rate—the cut the company gets of each order placed via its platform. That metric hit 1.99 per cent in the first quarter, up 0.20 percentage points year-over-year. 

The message wasn’t enough to stop Shopify’s stock slide. Here’s what you need to know:

The market’s verdict: Shopify shares closed at US$377.49 on the New York Stock Exchange, down more than eight per cent. At Friday’s open, the stock had plummeted 71.2 per cent for the year to date and 77.3 per cent from its mid-November 2021 peak. While Shopify’s suffered a steeper decline, other internet and e-commerce companies have also seen their share price drop. The Vanguard Information Technology Index has fallen a more modest 20.7 per cent in 2022; the Amplify Online Retail ETF, which holds US$290.4 million in assets, is down 42.3 per cent.

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Passing notes: Consumers are spending more of their cash in the real world on travel and services, and because of inflation have less of it to go around—and that “will continue to pressure Shopify’s growth and share price in 2022,” CIBC Capital Markets analyst Todd Coupland wrote in an investor note published Thursday. The firm’s first-quarter results fell short of consensus expectations on at least seven metrics, per his calculations, including total and monthly-recurring revenue and the performance of both its software and merchant-solutions businesses. The bank lowered its price target on the stock from US$460 to US$430. 

“While the pandemic is benefiting Shopify from the acceleration to online, the company may face material headwinds as it laps tougher comps and consumers resume some in-person shopping,” RBC Capital Markets analyst Paul Treiber wrote in his Thursday note. But he noted the company’s projection-beating growth in take rate in the first quarter. While the bank didn’t revise its price target again, after a downgrade last month, it’s at US$1,000—well below the US$1,800 at which it opened the year.

#e-commerce #Shopify

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Photo: CNBC Television via YouTube

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