Drifting toward 52-week highs in recent weeks, Shopify SHOP shares soared another +20% on Tuesday after reporting strong Q3 results this morning.
With SHOP sitting on nearly +40% gains for the year, let’s review Shopify’s Q3 report and see if it's still time to buy stock in the internet-commerce platform provider.
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Shopify’s Q3 Results
Stating its unified commerce platform is becoming the go to choice for merchants of all sizes, Shopify highlighted a sixth consecutive quarter of 25% revenue growth or greater. Third quarter sales stretched 26% to $2.15 billion versus $1.71 billion in the comparative quarter. This topped Q3 sales estimates of $2.1 billion by 2%.
Shopify was able to turn a higher profit with net income spiking to $828 million compared to $718 million in Q3 2024 (GAAP). SHOP produced adjusted earnings of $0.36 per share which surpassed the Zacks EPS Consensus of $0.27 by 33% and was nicely up from $0.24 a share in the prior period.
More reassuring is that Shopify has surpassed top and bottom line expectations for nine consecutive quarters, posting an average sales and earnings surprise of 2.41% and 24.5% in its last four quarterly reports respectively.
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Holiday Season Optimism
Shopify attributed its stronger than expected financial results to a growing number of major retailers that are using its online software platform for commerce. This includes the likes of Reebok, Lions Gate Entertainment LGF.A, Vera Bradley VRA, and HanesBrands HBI among others.
Serving as a further catalyst to the post-earnings rally was Shopify’s optimism for the holiday shopping season. For Q4, Shopify expects revenue growth in the mid-to high twenties percentage point range which is aimed above the current Zacks Consensus of roughly 23% growth or $2.11 billion (Current Qtr below).
Based on Zacks estimates, Shopify’s total sales are expected to increase 22% in fiscal 2024 and are projected to expand another 19% in FY25 to $10.32 billion.
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EPS Growth & Revisions
Shopify is currently expected to post 51% EPS growth in FY24 with projections at $1.12 versus earnings of $0.74 a share last year. Plus, FY25 EPS is projected to increase another 18% to $1.33. Notably, FY24 earnings estimate revisions have remained unchanged over the last 30 days while FY25 EPS estimates are slightly up.
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Bottom Line
Reconfirming its appealing growth trajectory, Shopify’s stock sports a Zacks Rank #2 (Buy). Amid a very sharp post-earnings rally, it would be no surprise if SHOP keeps moving higher. To that point, earnings estimate revisions are likely to rise for Shopify in the coming weeks in correlation with the company’s strong Q3 results and upbeat guidance.
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Today, See These 5 Potential Home Runs >>Shopify Inc. (SHOP) : Free Stock Analysis Report
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