Shopify stock surges on Q1 earnings beat, logistics deal with Flexport

Yahoo Finance Live discusses a surge in shares of Shopify after announcing a strategy shift which saw the company cut 20% of its workforce as well as selling the majority of its logistics business to Flexport.

Video Transcript

- Kicking it off with Shopify announcing a big strategy shift today. The company is also cutting 20% of its workforce and selling the majority of its logistics business to Flexport. Now, the deal is getting the support of Wall Street, with Citi calling it a, quote, "friendly deal" and Baird writing in a note to clients that it, quote, "sets up the company for long-term success."

Now, as part of this agreement, Shopify will get a 13% equity interest in Flexport and a seat on its board. Shares today are surging, up just about 26% in intraday trading on those cost-cutting measures, the deal, and then also its stronger than expected first quarter results and sales outlook, the biggest intraday pop that we are seeing in about seven years, Akiko. So lots of excitement from the number of announcements that we heard from Shopify over the last 12 hours or so.

- Yeah. When you talk about what they mentioned on logistics, that is quite the reversal. When you think about Shopify, I mean, they have really been trying to beef up their logistics side. You talk about the company taking part in the funding round with Flexport, their equity stake there. They also acquired a logistics startup, Deliverr. And here they are talking about really trying to focus more on their core business, moving away from what the CEO describes as side quest.

And to me, that just sort of points to just what so many companies are dealing with in this environment, investors increasingly looking for companies to double down on more profitable businesses. If you think about Shopify, it really is about going back to that focus of how they started, which is software, or helping with software, for a lot of these small businesses.

ALEXANDRA CANAL: And it seems like this is something that investors wanted as well due to the potential upside when it comes to margins. And we've seen this story before with investors really championing these strategic shifts, these cost cuts. And when it comes to layoffs, this is the second time in 10 months that Shopify has had to cut its workforce. Across tech, we saw this over investment during the pandemic where everyone really bet on that online boom, that e-commerce boom. And when that started to subside, unfortunately, that meant a lot of layoffs. But today, for Shopify, those shares are soaring.