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For the to-be-reported quarter, Shopify expects revenue growth in the high teens on a year-over-year basis. Adjusting for a 300-400 basis points headwind related to the divestiture of the logistics business, revenues are expected to grow in the low to mid-twenties on a year-over-year basis.
The Zacks Consensus Estimate for revenues is currently pegged at $2 billion, suggesting growth of 18.32% from the year-ago quarter’s reported figure.
The consensus mark for earnings is pegged at 20 cents per share, down by a penny over the past 30 days and indicating 42.86% growth from the figure reported in the year-ago quarter.
SHOP’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 57.00%, on average.
Let’s see how things are shaping up prior to this announcement.
Factors to Note
Shopify is benefiting from strong growth in its merchant base, a trend surely to be reflected in second-quarter results. Merchant-friendly tools like Shop Pay, Shopify Collective, Shopify Audiences, Shopify Capital and Shop Cash offers are helping it win new merchants regularly amid a challenging economic environment. Shopify’s platform is widely used by small and medium businesses that are suffering from persistent inflation.
The company has been investing profusely in developing the best solutions for modern e-commerce. Product offerings like Shop Pay, Bill Pay, Tax Platform, Collective and the Marketplace Connect app.
Integration of AI through Shopify Magic across products and workflows is helping merchants expand their footprint. Shopify Checkout is helping merchants offer secure and seamless checkout options for customers.
Merchant expansion is expected to have aided Gross Merchandise Volume (GMV) growth in the to-be-reported quarter. In the first quarter of 2024, Shop Pay processed $14 billion in Gross Merchandise Volume (GMV) and accounted for 39% of SHOP’s Gross Payments volume (GPV). In the first quarter, GPV grew to $36.2 billion, constituting 60% of GMV processed.
The Zacks Consensus Estimate for GMV is currently pegged at $66 billion, indicating 20% year-over-year growth.
The consensus mark for second-quarter Subscription solutions revenues is pegged at $506 million, indicating 20.3% year-over-year growth. The Zacks Consensus Estimate for Merchant Solutions is pegged at $1.47 billion, suggesting 17.6% year-over-year growth.
SHOP Shares Underperform Sector, S&P 500
SHOP shares have lost 30.1%, underperforming the Zacks Computer & Technology sector’s return of 14.5% and the S&P 500’s 12.4%.
Year-to-Date Performance Chart
Image Source: Zacks Investment Research
Shopify Trading at a Premium
The Value Style Score of F suggests a stretched valuation for Shopify at this moment, which makes it a risky bet for risk-averse investors.
SHOP stock is trading at a premium with a forward 12-month Price/Sales of 7.37X compared with the Zacks Internet Services industry’s 5.38X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
SHOP Stock to Ride Higher on Strong Merchant Base
Shopify’s long-term prospects are strong, given its growing merchant base and an expanding partner base. Its strategy of adding features and updates frequently, 400 in the past couple of years, has been the key catalyst.
An expanding partner base that includes TikTok, Snap, Pinterest, Criteo, IBM, Cognizant, Amazon (AMZN - Free Report) , Target (TGT - Free Report) , Manhattan Associates (MANH - Free Report) , COACH and Adyen is expected to expand its merchant base further.
Shopify’s strategy to focus on the core business by divesting the logistics business is a noteworthy development. Its partnership with Amazon allows Shopify merchants to use the former’s massive fulfillment network. The relationship with Target also strengthens SHOP’s footprint.
The partnership with Avalara now helps Shopify merchants of any size to easily manage and automate global tax compliance. The collaboration with Manhattan helps it offer world-class unified omnichannel shopping experiences for consumers.
Shopify’s expanding international footprint is noteworthy. In the first quarter, it launched point-of-sale go and point-of-sale terminal in Australia. Expanding the availability of the Markets Pro into international markets is a game changer.
Conclusion
Shopify is benefiting from strong growth in its merchant base. The expansion of back-office merchant solutions to more countries is strengthening SHOP’s international footprint.
Although the current valuation is stretched, the long-term growth prospects are hard to ignore.
Shopify currently carries a Zacks Rank #2 (Buy) and a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology.
Image: Bigstock
Is Shopify (SHOP) Stock a Smart Buy Before Q2 Earnings Report?
Shopify (SHOP - Free Report) is scheduled to report its second-quarter 2024 results on Aug 7.
For the to-be-reported quarter, Shopify expects revenue growth in the high teens on a year-over-year basis. Adjusting for a 300-400 basis points headwind related to the divestiture of the logistics business, revenues are expected to grow in the low to mid-twenties on a year-over-year basis.
The Zacks Consensus Estimate for revenues is currently pegged at $2 billion, suggesting growth of 18.32% from the year-ago quarter’s reported figure.
The consensus mark for earnings is pegged at 20 cents per share, down by a penny over the past 30 days and indicating 42.86% growth from the figure reported in the year-ago quarter.
SHOP’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 57.00%, on average.
Shopify Inc. Price and EPS Surprise
Shopify Inc. price-eps-surprise | Shopify Inc. Quote
Let’s see how things are shaping up prior to this announcement.
Factors to Note
Shopify is benefiting from strong growth in its merchant base, a trend surely to be reflected in second-quarter results. Merchant-friendly tools like Shop Pay, Shopify Collective, Shopify Audiences, Shopify Capital and Shop Cash offers are helping it win new merchants regularly amid a challenging economic environment. Shopify’s platform is widely used by small and medium businesses that are suffering from persistent inflation.
The company has been investing profusely in developing the best solutions for modern e-commerce. Product offerings like Shop Pay, Bill Pay, Tax Platform, Collective and the Marketplace Connect app.
Integration of AI through Shopify Magic across products and workflows is helping merchants expand their footprint. Shopify Checkout is helping merchants offer secure and seamless checkout options for customers.
Merchant expansion is expected to have aided Gross Merchandise Volume (GMV) growth in the to-be-reported quarter. In the first quarter of 2024, Shop Pay processed $14 billion in Gross Merchandise Volume (GMV) and accounted for 39% of SHOP’s Gross Payments volume (GPV). In the first quarter, GPV grew to $36.2 billion, constituting 60% of GMV processed.
The Zacks Consensus Estimate for GMV is currently pegged at $66 billion, indicating 20% year-over-year growth.
The consensus mark for second-quarter Subscription solutions revenues is pegged at $506 million, indicating 20.3% year-over-year growth. The Zacks Consensus Estimate for Merchant Solutions is pegged at $1.47 billion, suggesting 17.6% year-over-year growth.
SHOP Shares Underperform Sector, S&P 500
SHOP shares have lost 30.1%, underperforming the Zacks Computer & Technology sector’s return of 14.5% and the S&P 500’s 12.4%.
Year-to-Date Performance Chart
Shopify Trading at a Premium
The Value Style Score of F suggests a stretched valuation for Shopify at this moment, which makes it a risky bet for risk-averse investors.
SHOP stock is trading at a premium with a forward 12-month Price/Sales of 7.37X compared with the Zacks Internet Services industry’s 5.38X.
Price/Sales Ratio (F12M)
SHOP Stock to Ride Higher on Strong Merchant Base
Shopify’s long-term prospects are strong, given its growing merchant base and an expanding partner base. Its strategy of adding features and updates frequently, 400 in the past couple of years, has been the key catalyst.
An expanding partner base that includes TikTok, Snap, Pinterest, Criteo, IBM, Cognizant, Amazon (AMZN - Free Report) , Target (TGT - Free Report) , Manhattan Associates (MANH - Free Report) , COACH and Adyen is expected to expand its merchant base further.
Shopify’s strategy to focus on the core business by divesting the logistics business is a noteworthy development. Its partnership with Amazon allows Shopify merchants to use the former’s massive fulfillment network. The relationship with Target also strengthens SHOP’s footprint.
The partnership with Avalara now helps Shopify merchants of any size to easily manage and automate global tax compliance. The collaboration with Manhattan helps it offer world-class unified omnichannel shopping experiences for consumers.
Shopify’s expanding international footprint is noteworthy. In the first quarter, it launched point-of-sale go and point-of-sale terminal in Australia. Expanding the availability of the Markets Pro into international markets is a game changer.
Conclusion
Shopify is benefiting from strong growth in its merchant base. The expansion of back-office merchant solutions to more countries is strengthening SHOP’s international footprint.
Although the current valuation is stretched, the long-term growth prospects are hard to ignore.
Shopify currently carries a Zacks Rank #2 (Buy) and a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.