Shopify Set to Report Q4 2024 Earnings with Strong Growth Indicators
Shopify SHOP is preparing to announce its fourth-quarter 2024 results on February 11.
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For the upcoming quarter, Shopify is anticipating revenue growth of 20-30% year-over-year.
The Zacks Consensus Estimate for revenues stands at $2.72 billion, which reflects a growth of 27.02% compared to the same quarter last year.
The anticipated earnings consensus is at 44 cents per share, showing no change in the past month and signifying a 29.41% increase from last year’s earnings for the same quarter.
Shopify has consistently outperformed the Zacks Consensus Estimate in the last four quarters, with an average earnings surprise of 24.5%.
Shopify Inc. Price and EPS Surprise
Shopify Inc. price-eps-surprise | Shopify Inc. Quote
Analyzing Factors Ahead of the Q4 Announcement
Shopify’s growth continues to be driven by an expanding merchant base. This trend is expected to positively impact the forthcoming quarterly results. Tools such as Shop Pay, Shopify Payments, and AI-driven services are attracting new merchants, even in a tough economic environment.
In the third quarter of 2024, Gross Merchandise Volume (GMV) rose by 24% year-over-year, buoyed by factors like strong same-store sales from Plus merchants and increased international growth. This momentum is likely to continue and reflect in the upcoming quarter as well.
The Zacks Consensus Estimate for fourth-quarter GMV is set at $93 billion, which equals a 24% year-over-year growth.
For Subscription solutions in the fourth quarter, the revenue estimate is $650 million, showing a growth of 23.8% year-over-year. Merchant Solutions revenue is projected at $2.07 billion, indicating a growth of 28% year-over-year.
Growth in Gross Profit Expected
Shopify anticipates its fourth-quarter 2024 gross profit to increase by 24% from the previous year, matching the growth rate achieved in the third quarter, largely driven by heightened sales activity during the holiday season.
The consensus estimate for gross profit from Merchant Solutions stands at $788 million, representing a growth of 24.3% year-over-year, while Subscription solutions gross profit is expected at $529 million, a 23.6% increase.
Additionally, Shopify predicts a 300 to 400 basis point reduction in operating expenses compared to revenues.
Shopify’s Stock Performance Exceeds Expectations
Over the past year, SHOP shares have surged by 43%, outpacing the Zacks Computer & Technology sector by 23.6% and the Zacks Internet Services industry’s growth of 31%.
SHOP Stock’s Performance
Image Source: Zacks Investment Research
SHOP Stock Trading at a Premium
Currently, Shopify holds a Value Score of F, indicating a potentially overvalued situation. The stock trades at a forward 12-month Price/Sales ratio of 14.42, compared to the industry average of 6.10.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
Positive Outlook on Merchant Growth
Shopify’s future appears bright, underscored by a growing merchant and partner base. Its strategy of regularly introducing features—400 enhancements over the last two years—has notably driven this growth. In the fourth quarter alone, over 150 new features were released.
Collaboration with major partners such as TikTok, Snap, and even Amazon enhances Shopify’s capacity to attract more merchants. The union with Amazon, allowing access to its fulfillment network, is particularly significant for Shopify’s growth trajectory.
Moreover, the global reach of Shopify continues to expand, with new services like Tap to Pay available in numerous countries, benefiting merchants using Android devices.
The burgeoning enterprise customer segment, complemented by an innovative data migration tool that simplifies onboarding for new merchants, is a promising long-term driver for growth.
SHOP Stock: Buy or Hold Ahead of Q4?
Shopify is witnessing strong growth in its merchant network, expanding internationally, and gaining enterprise customers. However, macroeconomic challenges and potential tariffs may impact its short-term outlook. The benefits from PayPal integration and the growing enterprise customer segment are anticipated to materialize later in 2025. Concerns over high valuation also persist.
Shopify currently holds a Zacks Rank #3 (Hold), indicating that investors might consider waiting for a better opportunity to buy the stock.
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
