Shopify Earnings: Strong Results, but Restructuring and Disposal of Logistics Unit Steal the Show

Narrow-moat Shopify reported busy first-quarter results, with revenue and profitability that exceeded our expectations. Management provided some guideposts for next quarter that point to better performance than we were modeling. It also announced a 20% headcount reduction. Additionally, the company is selling its logistics business, including Shopify Fulfillment Network, to Flexport. We had thought Shopify Fulfillment Network would help drive meaningful growth but pressure margins, especially as it scaled. Given the results, guidance, and our attempt to model Shopify without its logistics business, we are raising our fair value estimate to $57/CAD 78 per share from $45/CAD 60. We expect some changes to our model as management provides further information upon closing the sale of the logistics business. Until then, we view the shares as fairly valued after the postearnings pop.