Shopify Set to Announce Q3 Earnings: Is This Stock a Must-Have for Your Portfolio?

Shopify (SHOP) is scheduled to release its Q3 2024 earnings on November 12.

 

For the upcoming quarter, Shopify expects year-over-year revenue growth in the range of 20% to 25%. Zacks Consensus estimates place Q3 revenue at $2.11 billion, reflecting an increase of 22.96% over the prior year. Consensus estimates for earnings stand at $0.27 per share, unchanged over the past 60 days and indicating a growth rate of 12.50% from the year-ago figure.

 

SHOP has exceeded Zacks Consensus earnings estimates in each of the past four quarters, with an average surprise of 31.17%.

 

Q3 Earnings Preview: Key Factors for SHOP

Shopify’s merchant base has shown strong growth, and this trend is expected to reflect in Q3 results. Merchant-friendly tools such as Shop Pay, Shopify Payments, Shopify Collective, Shopify Audiences, Shopify Capital, and Shop Cash have helped Shopify attract new merchants despite economic uncertainties. Shopify’s platform is widely used by small and medium businesses, many of which are feeling the pinch of persistent inflation.

 

Additionally, Shopify has added support for UPS and managed marketplaces, enabling merchants to offer competitive international shipping rates. The company’s continuous focus on optimizing operations has appealed to both small-scale merchants and larger brands.

 

Shopify has also heavily invested in developing modern e-commerce solutions, including Shop Pay, Bill Pay, Tax Platform, Collective, and the Marketplace Connect app.

 

Integration of AI through Shopify Magic across products and workflows is enabling merchants to expand their reach. Shopify Checkout provides secure and seamless checkout options for customers.

 

Merchant expansion is expected to have boosted Gross Merchandise Volume (GMV) in Q3. In Q2 2024, Shop Pay processed $16 billion in GMV, accounting for 39% of SHOP’s Gross Payments Volume (GPV). GPV grew to $41.1 billion, comprising 61% of total GMV.

 

Offline GMV grew 27% year over year, underscoring the increasing adoption of Shopify’s platforms by global merchants with multiple locations. A notable milestone in Q2 was the launch of multinational brands EVEREVE and MAJOURI, now available online and offline across more than 130 locations.

 

Additionally, over 50% of new merchants joining Shopify in Q2 were from non-English-speaking markets, a trend expected to continue in Q3.

The Zacks Consensus estimate for Q3 GMV is currently pegged at $68 billion, indicating a year-over-year increase of 25.93%.

 

Subscription Solutions revenue for Q3 is estimated at $593 million, up 28.08% year-over-year. The Merchant Solutions revenue estimate is $1.51 billion, up 26.04% year-over-year.

 

SHOP Stock Performance vs. Sector

SHOP stock has risen 5.2%, underperforming the Zacks Computer & Technology sector’s 28.5% return and the Internet Services industry’s 19.8% appreciation.

 

Valuation Concerns

Shopify’s current “Value Style Score” is F, indicating a high valuation at this time.

 

SHOP shares are trading at a premium, with a forward 12-month Price/Sales ratio of 10.5x compared to the industry’s 5.03x.

 

Growing Merchant Base Drives SHOP Stock

Shopify’s long-term outlook remains strong, supported by its expanding merchant and partner network. Over the past few years, Shopify has continually added new features and updates, with over 150 new product enhancements in Q2 2024 alone.

 

Its expanding partner network — including collaborations with TikTok, Snap, Pinterest, Criteo, IBM, Cognizant, Amazon (AMZN), Target, Manhattan Associates (MANH), COACH, and Adyen — is also expected to drive further growth. Additionally, Shopify recently formed a new partnership with Oracle (ORCL).

 

Focusing on its core business, Shopify divested its logistics unit, while its partnership with Amazon allows merchants to tap into Amazon’s extensive fulfillment network. Shopify’s alliance with Target has further strengthened its market presence.

 

Moreover, its collaboration with Avalara supports Shopify merchants in managing global tax compliance, while its partnership with Manhattan enhances omnichannel shopping experiences.

 

Shopify’s international footprint is also expanding. In Q1 2024, the company launched POS Go and POS Terminal in Australia, and its Markets Pro expansion is significantly boosting cross-border capabilities. In Q2, cross-border sales accounted for 14% of Shopify’s GMV.

 

Shopify’s merchant base continues to grow, and the expansion of back-office merchant solutions has solidified its position in international markets.

 

While Shopify’s valuation remains high, its long-term growth potential is hard to ignore.

 

According to Zacks’ proprietary methodology, Shopify currently holds a Zacks Rank #1 (Strong Buy) and a Growth Score of B, making it a compelling investment opportunity.

 

With Q3 earnings around the corner, what are your thoughts on Shopify’s performance? Do you believe Shopify is a must-have in today’s investment portfolio? We’d love to hear your insights!

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