Shopify Plunges After Earnings Miss, $ 2.1 Billion Acquisition

(Bloomberg) – Shopify Inc. dropped as much as 16% after it missed analysts’ estimates for revenue and profit and announced the largest acquisition in its history, a $ 2.1 billion deal for delivery startup Deliverr.

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The Canadian e-commerce software firm earned 20 cents per share on an adjusted basis in the first quarter, short of analyst calls for 64 cents. Revenue rose 22% to $ 1.2 billion from a year earlier, but could not match analyst expectations of $ 1.25 billion, according to data compiled by Bloomberg.

E-Commerce Stocks Tumble Amid Deepening Malaise Over Earnings

The shares were down 13% to $ 423.50 in premarket trading at 8:27 am in New York. They’ve declined nearly 70% this year.

E-commerce stocks have been pummeled this earnings season on concerns that online shopping is slowing as the Covid-19 pandemic fades. Amazon.com Inc. suffered the biggest one-day drop since July 2006 after it reported a weaker-than-expected revenue forecast. Wayfair, Etsy and EBay all dropped in premarket trading on Thursday.

Gross merchandise volume, the value of merchant sales flowing through Shopify’s platform, grew 16% in the first quarter from a year earlier to $ 43.2 billion. Analysts, on average, expected $ 46.5 billion.

Shopify also said it reached a deal to acquire Deliverr to expand in fulfillment services, confirming an April 20 report by Bloomberg News. In January, Shopify canceled several fulfillment and warehouse contracts intended to create its own distribution network.

Shopify to Buy Deliverr for $ 2.1 Billion: M&A Snapshot

The deal with Deliverr – which provides two-day delivery services for companies including Amazon, EBay, Etsy, and Walmart – more than doubles the size of Shopify’s fulfillment team. The transaction will be financed using 80% cash and 20% Shopify Class A shares.

“Being able to offer a delivery promise and fast fulfillment across all these channels boosts conversion,” Chief Financial Officer Amy Shapero said. “We are confident Deliverr’s ability to simplify the process, and arm merchants with visibility and control from the display of a delivery promise across multiple channels through its completion, will be a huge benefit to our merchants.”

Shopify has had a rough start to the year. A parade of analysts slashed the company’s price target ahead earnings. In a bid to draw retail investors, Shopify announced in April plans to split its stock 10-for-1.

The company is also seeking to make governance changes that would give Chief Executive Officer Tobi Lutke a special “founder share” that will preserve his voting power as long as he’s at the company, under certain conditions.

(Updates details on the Deliverr acquisition, premarket share price)

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