Earnings preview: Market bullish on Shopify ahead of Q2 results

There are multiple factors that make Shopify (SHOP) a distinctive entity in the Wall Street, such as its diverse product portfolio and growing market share. While Shopify managed to scale up business since the IPO, mainly by taking advantage of the prospects of the sector it serves, the ecommerce solutions provider is yet to turn profitable.

The company is expected to report yet another loss – of $0.027 per share – when it announces second-quarter results Tuesday before the market opens. It is slightly wider than last year’s $0.010-per share loss.  Meanwhile, analysts expect Shopify to report operating profit, on an adjusted basis, and revenues of $239 million for the quarter, amidst continuing drag on margins due to higher expenses and cost escalation related to expansion initiatives. The estimate for loss is better than the company’s projection, while the expected revenue is at the high end its forecast.

Of late, Shopify has been adding more and more enterprise customers to its client base. While the payments platform remained broadly stable since last year, the shipping division witnessed a marked growth.

When Shopify reports the results, one aspect of the business that is worth watching is the growth of recurring revenue in the subscription segment, because consistency in this area can be interpreted as underlying strength. Shopify Plus, the enterprise solutions platform, is an emerging area with the potential to become a growth driver in the coming quarters.

While the payments platform remained broadly stable since last year, the shipping division witnessed a marked growth.

For the first quarter, Shopify reported a 68% growth in revenues to $214.3 million, continuing the trend that began three years ago when it went public. However, the bottom-line remained in the negative territory in the last quarter, when the management invested heavily in expansion initiatives.

Shopify shares gained over 500% since they were listed on the New York Stock Exchange in 2015, all along maintaining upward momentum. After gaining progressively since the beginning of the year, the stock lost momentum last week and has been losing since then. Experts believe that the volatility will continue in the near term.

Related: Shopify Q1 earnings