Shopify SHOP is scheduled to report its fourth-quarter 2024 results on Feb. 11.

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For the to-be-reported quarter, Shopify expects revenues to grow at a mid-to-high twenties percentage rate on a year-over-year basis.

The Zacks Consensus Estimate for revenues is currently pegged at $2.72 billion, suggesting growth of 27.02% from the year-ago quarter’s reported figure.

The consensus mark for earnings is pegged at 44 cents per share, unchanged over the past 30 days and indicating 29.41% growth from the figure reported in the year-ago quarter.

SHOP’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 24.5%, on average.
 

Let’s see how things are shaping up prior to this announcement.

Key Factors to Note for SHOP’s Q4

Shopify is benefiting from strong growth in its merchant base, a trend that will likely be reflected in fourth-quarter results. Merchant-friendly tools like Shop Pay, Shopify Payments, Shopify Collective, Shopify Audiences, Shopify Capital, Shop Cash, Shopify Flow, AI-powered Shopify Inbox, Shopify Tax and managed markets are helping it win new merchants amid a challenging macroeconomic environment. 

In the third quarter of 2024, Gross Merchandise Volume (GMV) increased 24% year over year, driven by same-store sales growth from existing merchants driven by Plus merchants, growth in the number of merchants, strong international growth and robust point of sale growth (27% GMV growth year over year). These same factors are expected to have driven GMV growth in the to-be-reported quarter.

The Zacks Consensus Estimate for fourth-quarter GMV is currently pegged at $93 billion, indicating 24% year-over-year growth.

The consensus mark for fourth-quarter Subscription solutions revenues is pegged at $650 million, indicating 23.8% year-over-year growth. The Zacks Consensus Estimate for Merchant Solutions is pegged at $2.07 billion, suggesting 28% year-over-year growth.

SHOP’s Gross Profit to Grow at Q3 Rate

Shopify expects fourth-quarter 2024 gross profit to grow 24% (same rate as reported in third-quarter 2024) year over year, with higher percentage of revenues from Payments driven by high-volume holiday selling season. 

The Zacks Consensus Estimate for Merchant Solutions gross profit is currently pegged at $788 million suggesting 24.3% year over year. The consensus mark for Subscription solutions gross profit is pegged at $529 million, indicating 23.6% year-over-year growth.

Shopify expects a 300 to 400 basis point decrease in operating expenses as a percentage of revenues.

SHOP Shares Outperform Sector, Industry

SHOP shares have appreciated 43% in the trailing 12 months, outperforming the Zacks Computer & Technology sector’s return of 23.6% and the Zacks Internet Services industry’s appreciation of 31%.

SHOP Stock’s Performance

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Shopify Trading at a Premium

However, the Value Score of F suggests a stretched valuation for Shopify at this moment.

SHOP stock is trading at a premium with a forward 12-month Price/Sales of 14.42x compared with the industry’s 6.10x.

Price/Sales Ratio (F12M)

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SHOP Stock to Ride Higher on Strong Merchant Base

Shopify’s long-term prospects are strong, given its growing merchant base and expanding partner base. Its strategy of adding features and updates frequently — 400 in the past couple of years — has been the key catalyst. SHOP has added more than 150 new product updates and features in the fourth quarter of 2024.

An expanding partner base that includes TikTok, Snap, Pinterest, Criteo, IBM, Cognizant, Amazon AMZN, PayPal PYPL, Roblox RBLX, YouTube, Target, Manhattan Associates, COACH, Oracle and Adyen is expected to expand its merchant base further. 

Shopify’s partnership with Amazon allows Shopify merchants to use the former’s massive fulfillment network. SHOP became the first commerce integration partner for Roblox, which has on average has more than 88 million daily active users. The company integrated its platform with YouTube Shopping affiliate program and diversified its Payments product offering through the PayPal partnership.

Shopify’s expanding international footprint is noteworthy. In October 2024, the company expanded Tap to Pay across Shopify Point of Sale. Tap to Pay is now available in multiple countries, including Australia, Germany, the Netherlands and the United Kingdom, as well as merchants using Android devices. 

SHOP’s expanding enterprise customer base is a long-term growth driver. Its new data migration tool is helping new merchants import essential data like products easily and much faster.

SHOP Stock: Buy or Hold Ahead of Q4?

Shopify is benefiting from strong growth in its merchant base, international expansion and growing enterprise customer base. 

However, challenging macroeconomic conditions and new tariffs are expected to hurt SHOP’s near term prospects. Benefits from both the PayPal wallet integration and expanding enterprise customer base are expected to occur in the later part of 2025. Stretched valuation is also a concern.  

Shopify currently has a Zacks Rank #3 (Hold), which implies investors should wait for a more favorable point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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