By Shopify stock has shown significant momentum in recent months as the company implements a strategic reset plan following a slowdown in e-commerce during the pandemic.
A Challenging Period
The years 2022 and 2023 proved to be challenging for Shopify as it grappled with adapting to the new postpandemic shopping environment. The company had to make tough decisions, including two rounds of layoffs impacting approximately 30% of its workforce, and the sale of its logistics business.
Turning the Tide
Although these measures were painful, they have enabled Shopify to regain a stronger position in the latter half of 2023 and heading into 2024. Analysts assert that the company’s focus on enhancing its merchant offerings has started to yield positive results. Notably, Shopify introduced a new AI assistant and enhanced its point-of-sale options for brick-and-mortar retailers.
Merchant Satisfaction on the Rise
According to a recent survey conducted by Loop Capital, 73% of Shopify merchants expressed satisfaction with the platform—a significant nine-percentage-point increase from the previous quarter. Conversely, the number of dissatisfied clients decreased by five percentage points. These improvements prompted Anthony Chukumba, an analyst at Loop Capital, to raise his price target on the stock from $75 to $82 in late January, maintaining a Neutral rating.
In summary, Shopify’s fourth-quarter earnings report, anticipated on Tuesday morning, will provide valuable insights into the company’s progress as it rebounds from the challenges of the past. With a renewed focus on meeting merchant needs and improving user experience, Shopify’s potential for success seems promising.
Citi Analyst Increases Price Target Ahead of Shopify’s Earnings
Citi analyst Tyler Radke has raised his price target for Shopify ahead of its upcoming earnings report, despite maintaining a Neutral rating on the stock. Radke noted that the company’s guidance seems conservative considering the strong performance during the holiday season. Additionally, he mentioned that margins could potentially improve due to management’s operational discipline.
According to FactSet consensus estimates, analysts are predicting that Shopify will report adjusted earnings of 30 cents per share on $2.08 billion in revenue. Furthermore, it is expected that gross merchandise volume, which represents the total value of orders processed on Shopify’s platform, will increase by 19% to reach $72.5 billion.
The Street has been revising its estimates upwards leading up to the earnings report. Over the past week, earnings per share estimates have seen a 0.4% increase, according to FactSet data.
In a note last week, CIBC analyst Todd Coupland expressed confidence in Shopify’s ability to exceed FactSet expectations and named it his top pick for 2024. Coupland, who maintains an Outperform rating on the stock, raised his price target to $100 from $82.
Although the majority of analysts hold a more cautious view on the stock, with 54% rating it as Hold, 40% as Buy, and 6% as Sell, there is some skepticism due to Shopify’s valuation, which is closely tied to its 83% stock price surge over the past year.
“We are currently staying on the sidelines and waiting for a more favorable entry point,” Radke commented.
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