Weaker U.S. discretionary spending may impact Shopify, BNP Paribas analysts say

Investing.com -- Weakening U.S. consumer spending on higher-priced items may limit growth outperformance at Shopify Inc (NYSE:SHOP), analysts at BNP Paribas Exane said in a note on Wednesday downgrading their rating of the Canadian e-commerce group to underperform from neutral.

Earnings from American retail chains like Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) have been interpreted as a possible sign that cost-of-living pressures are leading shoppers in the world's largest economy to rein in discretionary expenditures in favor of essential items.

The BNP Paribas analysts warned that this trend could impact Shopify, which offers its clients tools and services to set up their own online stores.

The company saw demand surge during the pandemic, leading it to invest heavily in its order-fulfillment network. However, that boom has since waned, forcing Shopify to divest its logistics business and announce a wave of staff cuts.

Shopify's results remained resilient in the first quarter as a suite of new tools helped justify an uptick in its subscription fees. Revenue and adjusted income both beat estimates.

However, the BNP Paribas analysts said they expect the current quarter to be "noisy," with the sale of the logistics arm causing a slight step down in revenue.

Shares in Shopify were lower in early U.S. trading.