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The multi-channel, multi-tenant, cloud-based commerce platform Shopify SHOP fell approximately 18.6% on May 8 after the company issued pessimistic revenue guidance for the second quarter of fiscal 2024. On May 8, 2024, the company released its first quarter 2024 results before the opening of the market.
Shopify generated adjusted quarterly earnings of $0.20 per share, beating the Zacks Consensus Estimate of $0.16 per share. This compares to earnings of $0.01 per share a year ago. This quarterly report represents a earnings surprise of 25%.
Shopify, which belongs to the Zacks Internet Services industry, posted revenues of $1.86 billion for the quarter ended March 2024, surpassing the Zacks Consensus Estimate by 1.36%. That compares to revenue of $1.51 billion a year ago.
Shopify said gross merchandise volume, or the total volume of merchandise sold on the platform, increased 23% to $60.9 billion. This exceeded consensus expectations of $59.5 billion, according to StreetAccount, cited on CNBC.
Shopify’s AI initiatives
Shopify has recently improved its AI features for businesses, including “Shopify Magic,” which can automatically generate listings and edit images, among other things. However, its competitors, including Amazon, Etsy and eBay, are all banking on AI capabilities, meaning such a move is less likely to be a game-changer for Shopify in the short term.
Disappointing advice
For the second quarter of 2024, Shopify expects revenue growth in the range of 15% year-over-year, translating to a growth rate in the low to mid-20s after adjusting for of the impact of 300 to 400 basis points from the sale of its products. logistics companies. This is a slowdown compared to the previous period.
Second-quarter gross margin is expected to decline about 50 basis points from the first quarter of 2024. Meanwhile, Shopify said it expects operating expenses to increase in the low-to-mid range. in single digits from one quarter to the next, while Wall Street expected stagnation. growth, by CNBC. These same prospects marred an otherwise optimistic first quarter.
In a conference call with analysts, Shopify executives said U.S. consumer spending remains strong, but management is concerned about exchange rate headwinds from the strength of the U.S. dollar and some weakness in consumer spending in Europe.
Focus on ETFs
In the context mentioned above, one can opt for a cautious stance regarding direct investment in Shopify. However, for those inclined toward a long-term investment strategy, taking advantage of the ETF route to buying stocks on dips could be a prudent approach.
By doing so, investors can mitigate the specific risks associated with individual companies. Notably, Shopify holds significant weight in various technology-focused ETFs. In the event of a potential Federal Reserve rate cut toward the end of 2024 and likely positive outcomes from Shopify’s strategic initiatives, these ETFs could experience favorable impacts.
Dow Jones First Trust International Internet ETF FDNI – Weight of Shopify 8.87%
Bitwise Web3 ETF WEBB – Weight of Shopify 8.66%
ETF ARK Fintech Innovation ARKF – Weight of Shopify 7.51%
Franklin Disruptive Trading ETF BUYZ – Weight of Shopify 6.69%
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