Shopify Earnings Preview: Company Expected to Report Solid Results off Holiday Strength

Shopify is scheduled to report results for the fourth quarter on February 13th before the market opens. Investors are keeping a close eye on the fourth-quarter results as the e-commerce platform stock recently crossed $80 per share to set a new post-pandemic peak. The company is expected to report a 19.7% revenue growth year-over-year. Here are key points to watch before the earnings release:

Retail sales went up strongly in December as Americans showed a continued willingness to spend. Amazon, the significant bellwether for the online retail industry, set a positive precedent with its third-party segment reporting a 20% gain in the fourth quarter, outpacing the consensus estimate of 15.5%. In a company statement, Amazon CEO Andy Jassy attributed the company’s strong quarterly performance to a "record-breaking holiday shopping season."

2023 is a year of cuts for Shopify. The company cuts its workforce, cuts its non-core assets, and focuses on growth in e-commerce. It made these cuts to make it the best platform for businesses and it's now eyeing even more cuts. The non-GAAP operating margin is expected to reach 18.5% in logistics divestiture, lower R&D, general and administrative expenses.

Wells Fargo analyst Andrew Bauch raised the firm's price target on Shopify to $90 from $70 and kept an overweight rating on the shares. A strong holiday shopping season is largely priced in, and the firm's attention now turns to product updates, rank ordering 2024 catalysts and assessing the sustainability of margin outperformance, the analyst tells investors in a research note.

Source: Bloomberg