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Shopify (SHOP) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Shopify Inc. SHOP is slated to report fourth-quarter 2019 results on Feb 12.

For fourth-quarter 2019, Shopify projects revenues in the range of $472 million to $482 million. The Zacks Consensus Estimate for revenues is currently pegged at $482.3 million, suggesting growth of 40.3% from the year-ago quarter.

Further, the Zacks Consensus Estimate for earnings is pegged at 23 cents per share, unchanged over the past 30 days. The figure indicates decline of 11.5% from the prior-year reported figure.

Notably, the company has surpassed the Zacks Consensus Estimate for earnings in the trailing four quarters, with an average positive surprise of 172.17%.



Coming to price performance, shares of Shopify have skyrocketed 176.4% in the past year, outperforming the industry’s rally of 10%.

Here’s What the Zacks Model Suggests

Our proven model predicts an earnings beat for Shopify time around. According to the Zacks model, a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Shopify has an Earnings ESP of +15.30% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Factors Likely to Have Influenced Q4 Results

Robust adoption of Shopify’s easy-to-use upgrades and new merchant-friendly applications is anticipated to have bolstered adoption of Shopify Payments, Shopify Capital and Shopify Shipping solutions in the fourth quarter. This is expected to have driven the top line in the quarter under review.

An expanding merchant base is likely to have bolstered Gross Merchandise Volume (GMV) and Monthly Recurring Revenue (MRR) metrics and, consequently, revenues from Merchant Solutions and Subscription Solutions, respectively.

Notably, the Zacks Consensus Estimate for revenues from MRR and GMV currently stands at $55 million and $19.926 billion, respectively. Notably, in the third quarter, MRR and GMV came in at $50.7 million and $14.8 billion, respectively.

Markedly, on Dec 3, 2019, Shopify noted that the company’s merchants set a record by achieving $2.9 billion in sales on Black Friday/Cyber Monday weekend, up 61.1% year over year. Strong holiday sales are expected to have driven Shopify’s fourth-quarter performance.

Notably, the Zacks Consensus Estimate for revenues from Merchant Solutions currently stands at $304 million, indicating sequential growth of 35.1%.

Moreover, the consensus mark for revenues from Subscription Solutions currently stands at $178 million, suggesting an improvement of 7.5% on a quarter-over-quarter basis.

Moreover, adoption of “multi-currency feature” aimed at enabling merchants to sell products in several currencies and receive payments in their respective local currency, is expected to have driven Shopify Plus revenues.
 

Shopify Inc. Price and EPS Surprise

Shopify Inc. Price and EPS Surprise

Shopify Inc. price-eps-surprise | Shopify Inc. Quote

Notably, Shopify has been working on extending language capabilities beyond English. The focus on local languages is expected to have helped the company in bolstering international presence. These initiatives to strengthen presence in the international market are likely to have contributed to the fourth-quarter performance.

Key Developments in Q4

In the fourth-quarter, Shopify announced the closure of the acquisition of 6 River Systems, provider of warehouse technology. The deal, worth roughly $450 million, is anticipated to boost growth of the company’s fulfillment network.

Although the acquisition holds promise in the long-term, Shopify’s increasing investments on product development, fulfillment network, infrastructure and platform, to maintain competitive position in the e-commerce market, is likely to have limited margin expansion in the fourth quarter.

The company also rolled out Shopify Email, a new email marketing tool to aid merchants in enhancing email marketing campaigns with templates, campaign analytics and brand asset importing functionalities.

Incremental adoption of the new service is expected to have aided merchants in expanding business with engaging experience, which is anticipated to get reflected in the fourth quarter performance.

Other Stocks that Warrant a Look

Here are a few stocks that you may consider, as our proven model shows that these too have the right combination of elements to post an earnings beat this quarter.

Alteryx, Inc. AYX has an Earnings ESP of +6.49% and a Zacks Rank #1. You can see  the complete list of today’s Zacks #1 Rank stocks here.

Applied Materials, Inc. AMAT has an Earnings ESP of +2.89% and a Zacks Rank of 1.

Five9, Inc. FIVN has an Earnings ESP of +1.02% and a Zacks Rank of 2.

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