Shopify Q3 Earnings Preview: Make or Break Report After Big Price Drop

By:Thomas Westwater

Shopify needs impressive Q3 numbers as its share price falls

  • Analysts expect EPS of $0.15 on an adjusted basis.
  • Shopify beat revenue expectations in five of the last eight quarters.
  • An AI-enabled suite of features will grab attention.

Shopify (SHOP) is scheduled to report third-quarter fiscal results on Thursday, Nov. 2 before the market opens. It will hold a management conference call at 8:30 a.m. eastern time (ET), according to a press release from Shopify.

Analysts expect to see earnings per share (EPS) of $0.15 on an adjusted basis and $0.05 on a GAAP basis. Revenue is seen crossing the wires at $1.67 billion with an adjusted net income of $178.54 million. Shopify beat revenue expectations in five of the last eight quarters, according to Bloomberg data.

Those numbers would represent modest growth from a year ago, when the e-commerce company posted EPS and revenue of -$0.02 and $1.36 billion, respectively. However, investors will also be keyed into the numbers on gross merchandise volume (GMV), which increased 17% to $55 billion.

Investors will eye Shopify's AI suite

Also on investors’ minds will be the recently launched Shopify Magic and SideKick, an AI-enabled suite of features on the platform aimed to help merchants with their businesses and increase productivity and workflows.

In the last quarterly update, management guidance said the company expected Q3 revenue growth in the low twenty-percentile range year-over-year and gross margin expansion of two to three percentage points from Q2, when gross margin came in at 49.3%.

Currently, analysts are mixed on their ratings, with 24 buys, 26 holds and 2 sells, according to Bloomberg. A 12-month target price of 66.81 is assigned against the current prices of 46.28. We should see several changes to those ratings in the weeks following the earnings results.

Trading SHOP earnings

SHOP is trading with an implied volatility rank (IVR) of 62.1 as of Friday, Oct. 27. That comes amid a monthly decline of over 15% in the stock price for October following a 17.93% decline in September. A broader pullback in equity prices isn't helping.

The closest expiration following earnings is the November 3 expiry, which shows an expected move of nearly five points at an implied volatility of 101.5%. However, later expirations, such as the November 15 expiry still offers some juicy premiums.

After the big monthly declines, traders may be looking at taking a shot at going long if they expect rosy earnings numbers. But, if you expect the stock price to stay within the expected move, a long-butterfly trade could also work for the earnings announcement.

In this case you would want to set your long puts at five points or more outside of the current price. For instance, buying the 40 and 52 puts while selling a put at the money. The debit paid is your max loss.


Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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