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Here's Why Should You Hold on to Shopify (SHOP) Stock for Now

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Shares of Shopify Inc. SHOP have been performing well of late. The company's shares have returned 41.1% in the past year against the industry's decline of 1.25%.

If you haven't taken advantage of the share price appreciation yet, its time you hold the stock in your portfolio as it looks promising and is poised to carry the momentum ahead.

What's Going in Shopify's Favor?

Q2 Results, Upbeat Guidance

Shopify delivered second-quarter 2018 adjusted earnings of 2 cents per share, comparing favorably with the Zacks Consensus Estimate of a loss of 2 cents. The figure also compared favorably with the year-ago quarter’s loss of 1 cent.

Total revenues surged 61.5% from the year-ago quarter to $244.96 million, comfortably outpacing the Zacks Consensus Estimate of $235 million. The figure also fared better than the guided range of $230-$235 million.

Top-line growth benefited from a diversified expanding merchant base. The company continues to launch a number of merchant-friendly applications to meet the requirements of a dynamic retail environment, consequently bolstering its merchant base.

For third-quarter 2018, Shopify projects revenues in the range of $253-$257 million. The Zacks Consensus Estimate is currently pegged at $256.5 million.

For full-year 2018, Shopify raised outlook. Management now envisions revenues in the band of $1.015-$1.025 billion (mid-point at $1.02 billion) better than the previous guided range of $1-$1.01 billion. The Zacks Consensus Estimate is pegged at $1.03 billion, almost in line with the mid-point of the guidance.

Growth Drivers

The company has introduced Shopify Payments in Japan, taking the total number of countries where the solution has been launched to eight.

With an aim to make the platform more merchant friendly, Shopify is working on extending language capabilities beyond English. The focus on local languages is aiding in bolstering international presence. We believe this inclusive move will boost engagement and consequently increase adoption going forward.

Moreover, the company will reap benefits from investments in latest technological developments such as virtual reality (“VR”) and augmented reality (“AR”), going forward.

Shopify has been developing various apps, including various AR based applications to streamline customer experience.

The company also partnered with Google to empower physical stores with enhanced security. The company provides Google Wi-Fi routers and Nest cam hardware across its Hardware Stores, to around 70,000 point-of-sale merchants. This aids businesses to monitor their physical outlets leveraging the Shopify dashboard, consequently streamlining management processes.

These innovative initiatives to enhance visibility across physical outlets along with exploring new markets are expected to significantly expand merchant base, going ahead.

At Unite, Shopify’s annual conference, the company unveiled various enhancements and unveiled new technologies aimed at enriching selling experience of merchants.

In a bid to make transactions easier for its merchants, Shopify is continuously focusing on the development of mobile applications. In this regard, the company released a free mobile app for Apple’s AAPL iOS devices. It has been made accessible to Shopify merchants in the App Store. The latest offering called Shopify Ping will be of extreme convenience to customers as the demand for mobile internet continues to rise.

The launch of Shopify Ping has made it easier for merchants to process payments, ship products and secures financing through messaging for their working capital needs.

Moreover, the new Shopify Ping will be compatible with Facebook FB and Instagram ads helping merchants connect to a wide customer base, consequently increasing the number of active users on the platform.

To Conclude

Shopify delivered a positive average earnings surprise of 232.5% in the last four quarters. Further, it has a long-term expected EPS growth rate of 25%.

We expect the trend to sustain and drive the overall financial performance of this Zacks Rank #3 (Hold) stock.

A better-ranked stock from the broader technology sector is NetApp, Inc. NTAP, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NetApp has a long-term earnings growth rate of 14.13%.

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