A month has gone by since the last earnings report for Shopify (SHOP Quick QuoteSHOP - Free Report) . Shares have added about 2.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Shopify due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Shopify Q2 Earnings Beat Estimates, Revenues Rise Y/Y

Shopify reported second-quarter 2024 adjusted earnings of 26 cents per share, comfortably beating the Zacks Consensus Estimate by 30%. The figure jumped 85.7% year over year.

Total revenues jumped 20.7% year over year to $2.05 billion, which beat the Zacks Consensus Estimate by 2.03%. After adjusting for the sale of the logistics business, revenues jumped 25% year over year.

Quarter in Detail

Subscription Solutions revenues increased 26.8% year over year to $563 million, primarily due to more merchants joining the platform, as well as pricing changes for existing merchants on its Standard and Plus subscription plans.

Merchant Solutions revenues improved 18.6% year over year to $1.48 billion, driven by robust Gross Merchandise Volume (GMV), which improved 22% year over year to $67.2 billion.
 
GMV growth was driven by strong same-store sales growth in Shopify’s existing merchants, continued growth in the global merchant base, 32% year-over-year growth in Europe (both strong same-sales growth and new merchant acquisition) and growth in offline business.

Offline GMV grew 27% in the second quarter of 2024. 

International merchant base grew 30% year over year in the reported quarter. More than 50% of this merchant base came from outside the core English-speaking markets. 

In the reported quarter, $41 billion of GMV was processed on Shopify Payments in the second quarter, 30% higher year over year. The penetration rate of Shopify Payments, as a percentage of GMV, was 61% compared with 58% in the year-ago quarter.

In the reported quarter, Shopify launched a Point of Sale (POS) terminal to eight additional countries that contributed a 2.4 times increase in GMV through its POS terminal on a sequential basis.  

As of Jun 30, 2024, Monthly Recurring Revenues (MRR) were $169 million, up 25% from the year-ago quarter. 

In the reported quarter, Shop Pay increased 45%, processing $16 billion of GMV and accounted for 39% of Shopify’s Gross Payments Volume (GPV).

GPV grew to $41.1 billion, constituting 61% of GMV processed in the second quarter compared with $31.7 billion (58% of GMV) in the year-ago quarter.

Operating Details

Non-GAAP gross profit increased 24.6% year over year to $1.05 billion. The gross margin expanded 160 basis points (bps) year over year to 51.4%.

Subscription gross margin expanded 190 bps year over year to 82.8%. Merchant Solutions gross margin expanded 100 bps on a year-over-year basis to 39.1%.

Adjusted sales and marketing expenses, as a percentage of revenues, increased 30 bps year over year to 16.8%. 

Adjusted general and administrative expenses decreased 110 bps to 4.5%. Adjusted research and development expenses, as a percentage of revenues, declined 390 bps year over year to 13.5%. 

Non-GAAP operating expenses increased 7.9% year over year to $753 million. Operating expenses, as a percentage of revenues, were 36.8% compared with the year-ago quarter’s 41.2%.

Shopify’s adjusted operating income was $299 million against the year-ago quarter’s income of $146 million.

Balance Sheet

As of Jun 30, 2024, Shopify had cash, cash equivalents and marketable securities balance of $5.02 billion compared with $5.2 billion as of Mar 31, 2024.

The free cash flow was $333 million in the second quarter of 2024 compared with $232 million in the previous quarter.

Free cash flow margin more than doubled on a year-over-year basis to 16%.

Guidance

For the third quarter of 2024, Shopify expects revenue growth in the low-to-mid-twenties on a year-over-year basis. 

The gross margin is expected to increase 50 bps sequentially.

Operating expenses, as a percentage of revenues, are expected between 41% and 42%.

The free cash flow margin is expected to remain unchanged sequentially. Shopify continues to expect to deliver a double-digit free cash flow margin for the rest of the year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 30.9% due to these changes.

VGM Scores

At this time, Shopify has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Shopify has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Shopify is part of the Zacks Internet - Services industry. Over the past month, Uber Technologies (UBER Quick QuoteUBER - Free Report) , a stock from the same industry, has gained 3.3%. The company reported its results for the quarter ended June 2024 more than a month ago.

Uber reported revenues of $10.7 billion in the last reported quarter, representing a year-over-year change of +15.9%. EPS of $0.47 for the same period compares with $0.18 a year ago.

For the current quarter, Uber is expected to post earnings of $0.39 per share, indicating a change of +290% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.4% over the last 30 days.

Uber has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.