Shopify (SHOP) is poised to hit new heights ahead of its third-quarter earnings release on Tuesday, November 12.
The e-commerce platform company has been on a tear, reaching new 52-week highs as investors anticipate another strong performance. With the stock trading above $90, all eyes are on the company’s ability to deliver on its growth promises. Here’s a breakdown of what to watch for in the earnings report:Revenue Expectations
Analysts are expecting Shopify to report third-quarter revenue of $2.11 billion, a significant jump from the $1.71 billion recorded in the same period last year. This would mark the company’s second-highest revenue total ever, trailing only the record $2.14 billion achieved in the fourth quarter of 2023. The company has consistently exceeded revenue estimates for seven straight quarters, fueling investor confidence.
Earnings Per Share
Earnings per share (EPS) estimates are also positive, with analysts projecting 27 cents per share, up from 24 cents in the previous year’s third quarter. Shopify has a track record of exceeding EPS expectations for eight consecutive quarters, indicating a strong financial performance.
Gross Merchandise Volume (GMV)
Investors will be closely watching Shopify’s GMV, which is the total value of goods sold through the platform. In the second quarter, the company reported a record GMV of $67.2 billion, representing a 22% year-over-year increase. Continued robust GMV growth will be crucial for demonstrating the company’s market dominance and ability to navigate evolving consumer spending patterns.
Partnerships and Investments
Shopify’s strategic partnerships, particularly the recent expansion of its collaboration with PayPal Holdings Inc. (PYPL), are a key area of focus for investors. This deal will see PayPal become an additional payment processor on the Shopify Payments platform, potentially expanding the company’s reach and merchant opportunities.
However, the company’s recent investment in marketing to drive revenue growth could impact profit margins, a factor that investors will be closely observing.
Analyst Sentiment
Analysts have been increasingly optimistic about Shopify’s prospects, with many raising their price targets in recent weeks. Scotiabank maintained its Sector Perform rating while raising the price target from $75 to $80. RBC Capital maintained its Outperform rating and increased its price target from $85 to $100, while Loop Capital kept its Hold rating but raised the price target from $80 to $90.
Shopify’s Stock Performance
The stock has been on a strong upward trajectory, hitting a new 52-week high of $92.16 in early trading on Monday. The stock is currently up 24.3% year-to-date, reflecting investor confidence in the company’s growth prospects.
Looking Ahead
The upcoming earnings report will be a crucial test for Shopify. Investors will be closely watching to see if the company can deliver on its promises of continued growth and profitability, while navigating the dynamic e-commerce landscape. Analysts will be looking for signs that the company is successfully leveraging its partnerships, expanding its reach, and maintaining its strong financial performance.
