Shopify slumps despite strong growth: the gray areas that are worrying the markets

Published: 2025-05-08 10:34:03 ET SHOP

Published on 05/08/2025 at 10:34

By Eloi Suinot

Despite an eighth consecutive quarter of growth of more than 20%, Shopify's stock fell sharply before the opening of Wall Street. Here are the areas of concern that explain this decline.

Key figures to remember:

This loss of $908 million is obviously latent, as the securities have not been sold: Shopify had to adjust their book value on March 29, just before Donald Trump announced the new tariffs. Hence the concern: some investors are questioning the quality of the group's investments.

The result: earnings per share of -$0.53, far below the consensus estimate of +$0.17.

Forecasts deemed cautious

Another point of tension: Shopify is revising its gross margin targets for the current quarter downwards. After a 22% increase this quarter, management is now aiming for a 16-19% increase, compared with the more than 20% expected by analysts. Reuters sees this as one of the reasons for the slowdown.

Added to this is disappointment over gross merchandise volume, which rose 14% to $74.75 billion, but fell short of expectations ($76.09 billion).

Finally, since the beginning of the year, the stock has fallen 11%, penalized in particular by the end of the "de minimis" exemption for small, inexpensive packages. This measure could hit small merchants on the platform hard and has prompted several analysts to revise their price targets downward in recent months.

In fact, the entire retail market is bracing for a storm, with market leader Amazon also forecasting lower-than-expected profits. With 64% of its revenue coming from the US in 2024 and a significant proportion of Chinese products due to the phenomenon of "dropshipping," the outlook is bleak.

Shopify, for its part, is even encouraging the dropshipping model for Chinese products: the platform has published a guide for "entrepreneurs" wishing to set up a business based on purchasing products on AliExpress and reselling them at a markup but with no real added value.

Despite a quarter deemed "excellent" by its CEO, Shopify is seeing red after its results. Expectations are particularly high for this type of company with extraordinary valuations. Accustomed to sustained growth, all it takes is a few clouds on the horizon to cause a massive flight of capital. Shopify, for example, has a P/E ratio of 85, an exceptional level even in a rapidly expanding sector.

Eloi Suinot