Shopify Earnings Momentum Accelerates Before Holiday Season

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Shopify (SHOP) stock jumped out of the gate Tuesday after the e-commerce technology company beat top- and bottom-line expectations for its third quarter and provided a strong outlook for its fourth quarter.

In the three months ended September 30, Shopify's revenue increased 26.1% year over year to $2.2 billion, boosted by a 24% surge in gross merchandise volume (GMV) to $69.7 billion. Its net income nearly doubled from the year-ago period to $344 million.

"Q3 was outstanding, further establishing Shopify as a leader in powering commerce anywhere, anytime," said Shopify President Harley Finkelstein in a statement. "Our unified commerce platform is becoming the go-to choice for merchants of all sizes."

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The results topped analysts' expectations. Wall Street was anticipating revenue of $2.1 billion and net income of $332 million, according to Investor's Business Daily.

For the fourth quarter, Shopify said it expects to achieve revenue growth at a mid-to-high-twenties percentage rate from the prior year, which is well ahead of the 23% year-over-year growth rate analysts are anticipating.

"As the busiest shopping season of the year for our merchants approaches, they trust Shopify to provide the tools, unmatched speed, and reliability to maximize their success," Finkelstein said.

Is Shopify stock a buy, sell or hold?

Shopify has outperformed the broad market in 2024, up nearly 43% for the year to date vs the S&P 500's roughly 26% gain. And Wall Street remains bullish on the tech stock.

According to S&P Global Market Intelligence, the consensus recommendation among the 52 covering analysts it tracks is a Buy.

However, analysts' price targets have struggled to keep up with the large-cap stock's surge in 2024. Indeed, the average price target of $82.58 represents a steep discount to current levels. However, analysts may very well raise their price targets on SHOP following the company' strong earnings results.

Financial services firm Oppenheimer has an Outperform rating (equivalent to a Buy) on Shopify stock.

"Shopify has established itself as a fast-growing, pure play software-as-a-service (SaaS) Commerce application vendor that is taking share of retailer technology spend," said Oppenheimer analyst Ken Wong in an August 7 note. "We think Shopify is well led by a visionary and respected management team and are confident in its multi-year growth potential. Shopify is a generational technology disruptor in a large and underpenetrated Digital Commerce opportunity."

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.