Shares of Shopify (TSX:SHOP) recovered yet again, as the e-commerce company surged 7% to end the week. Shopify stock saw shares fall during one of the worst trading days in the last four months, only to climb back once more.
So now, with earnings due around the corner, should shareholders get out on a high or double down?
E-commerce focus
Last year was the year of cuts. Shopify cut its workforce, cut its non-core assets, and focused 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.
Shopify stock came into 2024 with the goal to compete with big retailers. The stock came on the scene, helping small- and medium-sized businesses, turning them into the future’s enterprise companies. However, the company needs to support those enterprise companies and attract even more.
So, for 2024, the company is focusing on what problems are currently there that could be keeping these companies away. If it solves this issue, Shopify stock would have access to a larger market share opportunity.
Well on the way
For enterprise-level clients, Shopify stock has found that for every client it loses, it gains about 38 more at this level. And that’s a huge level, given these are clients with more than US$125 million in annual sales. Furthermore, the company needs it after the pandemic surge of small and medium business growth has slowed down.
While the tech stock will certainly need to innovate to attract these larger investors, it still holds advantages. It’s cheaper and faster to get up and running compared to competitors. It remains flexible, and that’s proven huge for enterprise clients who want to produce something new and get it out quickly and cheaply.
What we’ve seen
During the company’s third quarter, Shopify stock’s enterprise platform, Shopify Plus, contributed US$44 million to the total monthly recurring revenue. While down from 2022 levels, it was still an increase from 2021 when the company was still more e-commerce focused.
For the next quarter, Shopify stock is expected to post US$0.31 earnings per share (EPS), a year-over-year change of about 343%! Furthermore, for the year, it should post US$0.70 EPS, a huge 1,650% increase. We could also see an upgrade in guidance, leading to an even higher likelihood that shares will rise.
Shopify stock also has a history of surprising investors when things are going well with even more growth. So, while the stock does look pricey, it could still see growth, at least over the next year — especially as it brings on more and more enterprise clients.
Bottom line
The key will be seeing how the company will innovate. How will it mark itself as a company that’s different from other large retailers? In the meantime, it should also benefit from a more global presence and perhaps an economy with lower interest rates in the near future.
Meanwhile, there aren’t likely to be many negative surprises come earnings when they come out Feb. 13. So, definitely keep your eye on this stock if you’re hoping for more over the next year and perhaps beyond.
