Yahoo Finance Despite economic uncertainty, analysts upbeat ahead of Shopify's earnings
E-commerce software company will unveil Q3 earnings before markets open on Thursday
As questions loom about the financial health of consumers and retailers going into the all-important holiday season, Shopify’s (SHOP.TO)(SHOP) upcoming earnings may offer a glimpse into the resiliency of the e-commerce market.
The e-commerce software company is set to unveil third-quarter earnings before markets open on Thursday morning, and some analysts are upbeat about its prospects, despite lingering economic uncertainty.
“We believe Shopify is likely to report healthy Q3 results,” RBC Capital Markets analyst Paul Treiber wrote in a research note last month. Treiber has an "outperform" rating on the stock, with a price target of $80 per share.
“While the macro environment (i.e. consumer spending) is uncertain, Shopify is seeing robust traction with merchants, solid uptake of new services, and improving profitability,” Treiber said.
“Shopify’s large (total addressable market), take-rate economics and strong product execution are likely to help sustain positive investor sentiment.”
Analysts on average expect total sales at Shopify to reach $1.67 billion in the third quarter, a nearly 23 per cent increase from the same period in 2022, with adjusted earnings per share coming in at 14 cents per share, according to data from Refinitiv.
ATB Capital Markets analyst Martin Toner wrote in a preview of the upcoming earnings that after a year of austerity and focus on profit among technology companies, revenue growth re-acceleration “is well underway at Shopify.”
“Although Shopify trades at a premium relative to the group, we remind investors that it is one of the few companies in the space to experience revenue growth re-acceleration in the current macro backdrop,” Toner wrote, maintaining his "outperform" rating, with a price target of $95 per share.
Shopify’s stock has been on a tear this year, up more than 32 per cent, even amid concerns about economic uncertainty.
This comes as the company shifted its strategy earlier this year to narrow its focus on its e-commerce platform, exiting the logistics business while shrinking its workforce. Last quarter, the company unveiled Shopify Magic, a suite of AI-enabled features integrated into its software that it says will help businesses make data-driven decisions and optimize operations.
But some analysts are feeling more cautious heading into earnings.
Citi analyst Tyler Radke wrote in a note to clients last week that “with uncertainty around interest rate hikes and cracks beginning to form in the U.S. consumer health profile, we are cautious on SHOP heading into Q3 earnings due to its sensitivity to consumer discretionary budgets and higher SMB exposure.” Radke reduced his price target for Shopify last week from $77 per share to $62 per share.
Still, Radke wrote that they remain positive on the ability of the company to benefit from consolidation in e-commerce software, but noted that valuations are near the top of Shopify’s peer group.
Shopify will report earnings on Thursday morning, and conduct a conference call with analysts before markets open.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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