If you’ve been watching Shopify (TSX:SHOP) with bated breath over the last year or so, you’re certainly not alone. Shares of Shopify stock have reached all-time highs of $228 (adjusted for the stock split) and have fallen to lows not seen since they came on the market.
And yet, shares are now back up 57% since hitting 52-week lows, where they have remained. After hitting $123 per share, Shopify stock is back down to hovering near the three-digit range. So, is the stock still a buy?
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What happened?
There are a few reasons as to why Shopify stock has seen a bit of a slowdown in investor interest. First off, the tech sector and the overall market in general have experienced a correction since February 2024. This could be dragging down Shopify’s share price even if the company itself is performing well.
However, there continue to be fears over growth for shoplift stock. The company continues to need to demonstrate that it can maintain its growth trajectory, even after the pandemic boom.
What’s more, e-commerce is increasingly competitive. Shopify stock continues to experience many players that will be stiff competition — not just online retailers like Amazon, but big-box retailers like Walmart. So, is it up to it?
Into earnings
One way to see whether Shopify stock has what it takes is to look at earnings. Shopify stock bounced in share price after announcing earnings back in February. However, this was met with a drop in share price when the market calmed down.
Even so, this could easily happen again come earnings on May 8. We can also look at past earnings to see what the company needs to do to earn back some investor interest once more.
During the second quarter, gross merchandise volume (GMV) hit US$55 billion, with total revenue at US$1.7 billion. Monthly recurring revenue (MRR) also came in at US$139 million, with profit at US$835 million.
The third quarter saw GMV reach US$56.2 billion, with revenue steady at US$1.7 billion. MRR rose slightly to US$141 million, with gross profit at US$901 million. That was a small increase, but far better than many other earnings during the third quarter.
By the fourth quarter, GMV reached an incredible US$75.1 billion, with revenue at US$2.1 billion. MRR increased further to US$149 million, with gross profit hitting US$1.1 billion. It was an excellent year overall, so what’s next?
Looking ahead
This is where things could get interesting. The fourth quarter was excellent for Shopify stock, and the company achieved strong earnings across the board. The big question, then, is whether the stock can keep it up.
For the first quarter, Shopify stock expects revenue to increase at the low-20s percentage rate on a year-over-year basis. This would mean hitting at least US$1.8 billion in revenue. Further, free cash flow as a percentage of revenue should be in high single digits. This would mean at least US$91 million as well.
So, should Shopify stock beat these estimates, and it has historically, we could see another bump in share price — one that could send that share price over the $100 edge.
