The provider of e-commerce solutions for small and not-so-small businesses reports quarterly results on Thursday morning. Armed with a fast-growing base that is now more than 500,000 merchants strong, Shopify has become a market darling. It's naturally going to have to step up with another monster report if it wants to stay that way, so let's look at some of the things that can get in the way of Shopify extending its winning streak.
1. Analysts could be getting ahead of the stock
It's been a good week for Shopify bulls. Aaron Turner at Wedbush boosted his price target from $120 to $140 on Monday. Darren Aftahi at Roth Capital followed on Tuesday, going from $127 to $144. It's typically an encouraging sign to see analysts waxing bullish just ahead of a report, but could these Wall Street pros be reacting more to the buoyant share price than the fundamentals?
Turner views Shopify as the top stock in his coverage universe, and he feels it's still early in penetrating the total addressable market. Aftahi's channel checks with Shopify merchants suggest that the fourth quarter was a strong one. These are all encouraging signs, but it wouldn't be the first time Wall Street got ahead of a company's fundamentals.
2. Citron may have more to say
Shares of Shopify took a short-lived hit four months ago after Citron Research blasted the stock, arguing that the stock was overvalued and that its referral network wasn't legal. Shopify countered the claims, and the shares eventually rose to hit fresh all-time highs, showing which side Mr. Market is taking in this matter.
However, the latest word isn't always the last word. Citron's last update followed Shopify's third-quarter conference call. We'll see if Citron has anything bearish to say after Thursday's call.
3. The landing strip is narrow for a wide jet
Analysts are all over the place in assessing how Thursday's numbers will play out. Wall Street pros see revenue growing between 59% and 70%, and when it comes to the bottom line, their per-share profit targets are as low as $0.02 to as high as $0.10. The consensus calls for a profit of $0.05 a share on 61% revenue growth, but reality will likely be entirely different.
The odds appear to be in Shopify's favor. It's not just Aftahi and Turner eyeing a strong quarter. Tom Forte at DA Davidson lifted his price target a week earlier, noting that Shopify is 9-for-9 in topping analyst quarterly revenue targets since its IPO. All signs are pointing to a strong quarter, but that also means the stock's going to take a big hit if it somehow falls short now that everyone's discounting a blowout.