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Shopify Stock Closes Down 16% After It Warns Pandemic Boost Will Fade

Chris Wattie | Reuters
  • Shopify warned in its fourth-quarter earnings report Wednesday that revenue would slow down in the first half of 2022.
  • It blamed a deceleration in e-commerce spending compared to the height of the coronavirus pandemic, along with other factors, like the end of government stimulus and potential impacts on consumer spending due to rising inflation.

Shares of Shopify plunged more than 18% on Wednesday after the company forecast a revenue slowdown in the first half of 2022, as the online shopping boost from the Covid-19 pandemic cools off.

Shares closed the day down 16%.

For the fourth quarter, Shopify posted revenue of $1.38 billion, which surpassed estimates of $1.34 billion. Adjusted earnings per share were $1.36, beating Wall Street's expectations of $1.27 per share.

Shopify, which makes tools for companies to sell products online, said revenue growth for 2022 would be slower than the 57% it saw in 2021. It cited a number of headwinds, including an end to the pandemic-induced e-commerce surge, the removal of government stimulus and concerns that consumer spending could slow as a result of rising inflation.

Shopify became one of the biggest winners of the pandemic-fueled shift to e-commerce. When the pandemic forced physical stores to temporarily shutter, many of those retailers turned to companies like Shopify to establish a web presence. The company's stock price surged in 2020 on the back of that momentum.

Now, e-commerce companies like Shopify, Etsy, eBay and Wayfair are under intense pressure to prove their businesses can continue to grow in a post-pandemic world.

Shopify said it expects year-over-year revenue to be highest in the fourth quarter, as "certain commercial initiatives and sales and marketing investments will gain momentum over the course of 2022."

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