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Preview: Factors driving Shopify results in Q3

Few stocks have showcased the kind of agility that Canadian e-commerce firm Shopify (NYSE: SHOP) has displayed this year; so much that it has earned comparisons with none other than industry veteran Amazon (NASDAQ: AMZN). The stock had almost tripled till August-end, when it was hit by an industry-wide sell-off.

The stock has currently stabilized at a level that is more than double its value at the beginning of the year. Yet, the market continues to see extended growth with an average yearly price target that that is at a 15% upside from the Friday’s trading price. The company’s third-quarter earnings, expected Tuesday morning, could provide the fuel needed for the stock’s propulsion.

Analysts expect the company to report earnings of 11 cents per share, compared to 4 cents per share it reported last year. Historically, it has a remarkable track record of surpassing estimates.

Shopify Q2 2019 earnings

Revenues are, meanwhile, expected to jump 42% to $383.76 million. While this marks a deceleration from last year, investors won’t mind as long as the growth rate doesn’t fall below the management’s expectation of 40% – 41%.

Shopify has been flowing most of its revenues into building an empire, rather than making profits. And a lion’s share of the contributions went into international expansion initiatives, including working on extending language capabilities. More languages translate to more diverse subscribers. 

READ: LogMeIn scores Q3 beat, announces CFO departure

Another major focus is the recently launched Shopify Fulfillment Network, pitting it directly against Amazon. These fulfillment centers are mostly run on artificial intelligence, including for the purpose of inventory management and distance calculation. The key to enhancing fulfillment capabilities was the $450-million acquisition of 6 River Systems, a provider of warehouse fulfillment solutions, earlier this quarter.

Shopify’s venture into the US cannabis industry is yet another area that investors are interested about. The company had recently launched a platform for retail sales of cannabis in US, somewhat replicating the business model back in Canada. These factors, besides its core user-friendly applications, are expected to drive upbeat results in Q3.

The market will also be looking for hints for the company’s profitability, which is, at end of the day, what matters to value investors.

Browse through our earnings calendar and get all scheduled earnings announcements, analyst/investor conference and much more!

Tags: E-commerce
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