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


Shopify Inc.SHOP is set to report fourth-quarter 2017 results on Feb 15. Notably, the company’s earnings have outpaced the Zacks Consensus Estimate in three out of the four trailing quarters, with an average positive surprise of 166.5%.

In the last quarter, Shopify reported non-GAAP earnings of 5 cents per share, which beat the Zacks Consensus Estimate of a loss of 2 cents per share. The figure also improved from a loss of 2 cents per share reported in the year-ago quarter.Moreover, revenues jumped 72% from the year-ago quarter to $171.5 million, comfortably surpassing the Zacks Consensus Estimate of $166 million.

Shopify continues to launch a number of merchant-friendly applications to meet the requirements of a dynamic retail environment, thereby adding to its merchant base which gets reflected in the year-over-year top-line growth.

We expect the company’s merchant focus strategy and strong partner referral system to expand its customer base, ultimately driving the top line. Moreover, the availability of Apple Pay AAPL and addition of eBay EBAY, Amazon AMZN, Facebook Messenger and Instagram as sales channels will have a significant impact on the top line in the soon-to-be reported quarter.

Shopify Inc. Price and EPS Surprise

Shopify Inc. Price and EPS Surprise | Shopify Inc. Quote

Guidance & Estimates

For fourth-quarter 2017, Shopify projects revenues in the range of $206-$208 million. The Zacks Consensus Estimate for the same is pegged at $207.99 million.

Notably, shares of Shopify have gained 128.3% in the past year, substantially outperforming the 23.2% rally of the industry it belongs to.

Factors to Influence Q4 Results

In the soon-to-be reported quarter, the company is expected to see a significant increase in revenues driven by record sales. Shopify recently announced that its worldwide merchant base of over 500,000 sold more than $1 billion worth of gross merchandise volume (GMV) during the Black Friday and Cyber Monday (BFCM) weekend. Merchants also generated above $1 million transactions in a minute during the peak hour. This reflects the company’s solid global presence.

The shipping partnerships with the likes of UPS and DHL Express are added positives. The application called Live View helped in real-time reporting of the performance of the stores. Also, the discounting procedure was simplified.

In addition, the company’s new application called Buy Online for Shopify POS that enabled shoppers to try products in person and then buy those at a later convenient date is encouraging.

The company added quite a few prominent brands like Phoenix Suns, RBS, Josie Maran and Rebecca Minkoff. Consumer packaged goods providers like Gurmay, Mai, Blue Diamond Growers and Beer Nuts also enriched the merchant base.

We believe the company’s easy-to-use upgrades and expanding merchant base to boost GMV, which soared 69% from the year-ago quarter to $6.4 billion in the preceding quarter. This trend is anticipated to continue, thereby aiding the company to perform impressively, going ahead.

However, Shopify is a relatively new player in the e-commerce marketplace. Although it is not a direct competitor to behemoths like Alibaba and Amazon, many of its customers are. Moreover, the company focuses on the SMB segment, which is more susceptible to macro-economic headwinds. Both factors present significant risk for growth prospects.

Further, management expects results to be impacted by seasonality and a significant impact of foreign exchange on operating expenses.

Shopify carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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