Shopify Q1 Earnings Outlook: Traders Eye Key Metrics as Rally Continues
Shopify Q1 Earnings Outlook: Traders Eye Key Metrics as Rally Continues
Shopify Earnings Preview: Will a Subtle Recovery from 2022 Continue?
Shopify, Inc. ($SHOP) is set to report corporate first-quarter earnings results on Thursday, May 04, before the market opens. The results will be followed by an earnings call at 8:30 am Eastern Time, according to a press release from Shopify.
After an early-year recovery in January following heavy losses in 2022, investors have been hesitant to bid the price higher, although a modest rally has taken shape recently. The US-listed stock price has been capped below $50 per share since earlier this year.
The likelihood of a recession in the United States and Canada has cooled investor sentiment, especially for consumer brands. Amazon, a comparable company to Shopify, also sold off heavily in 2022 and has so far failed to recover the bulk of those losses, following a similar trend to its northerly competitor.
What Are Investors Looking for on Thursday?
Investors want to see the bump in sales growth from the fourth quarter, when revenue grew 26% from a year ago, to continue. Currently, Wall Street estimates range around 20%, which would be slightly lower than the prior quarter.
More importantly, however, is likely the revenue from merchant solutions. That metric rose 30% to $1.3 billion in Q4 from a year ago and helped reinvigorate the bullish thesis on the stock. The primary driver for merchant revenue has come primarily from an increase in gross merchandise volume (GMV) and gross payments volume (GPV). Investors should be able to quickly identify those numbers, as they have traditionally been listed at the top of the financial highlights press release.
Investors will also be keyed in on what executives see surrounding cost reduction strategies, including seller fees and company headcount. Gross profit margins slipped to 46% in the fourth quarter from 50% a year before. A recent fee increase may have helped bring that number up and, if so, would go a long way in keeping the bulls happy.
Shopify Stock Chart: What Are the Technical Indicators Flashing?
Shopify has carved out an upward channel since early March when prices hit a multi-month low. More recently, the 26-day Exponential Moving Average (EMA) has acted as support. With that in mind, a break below the channel’s lower bound or the 26-day EMA may spark a move lower, perhaps to the early March low at 39.02. Alternatively, an extension higher may target channel resistance.
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