Shopify (shop – (Free Report) recently appeared on the list of most searched stocks on Zacks.com. Therefore, you may need to consider some important factors that may influence the stock's performance in the near future.
Over the past month, the cloud-based commerce company's stock returned -15.9%. This compares to a +2.1% change in the Zacks S&P 500 Composite Index. During this period, the Zacks Internet Services industry, which includes Shopify, fell 7.1%. The key question here is: What is the future direction of the stock price?
While media releases and rumors about significant changes in a company's business prospects typically cause its stock to “trend” and lead to immediate price movements, there are some fundamentals that ultimately govern buy-and-hold decisions. There are always facts.
Regarding revisions to performance forecasts
Zacks prioritizes evaluating changes in a company's future earnings expectations above all else. That's because we believe that the present value of future income streams determines the fair value of a stock.
Our analysis is fundamentally based on how the sell-side analysts covering a given stock are revising their earnings estimates to account for the latest business trends. As a company's earnings expectations rise, so does the fair value of its stock. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, which causes the stock price to rise. For this reason, empirical research has shown that there is a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
Shopify is expected to post earnings of $0.16 per share for the current quarter, representing a +1,500% year-over-year change. Over the past 30 days, the Zacks Consensus Estimate has changed -40.7%.
The consensus earnings estimate for the current fiscal year of $0.94 represents a +27% change from the prior year. This estimate has changed -15.6% over the past 30 days.
Next year's consensus earnings estimate of $1.25 represents a +32.4% change from what Shopify was expected to report a year ago. Over the past month, the forecast has changed by -9.2%.
The Zacks Rank, a proprietary stock evaluation tool with a strong, outside-audited track record, effectively harnesses the power of earnings estimate revisions to deliver a more definitive picture about near-term stock price direction. We provide The magnitude of the recent change in consensus estimates, as well as three other factors related to earnings expectations, give Shopify a Zacks Rank #3 (Hold).
The chart below shows the company's consensus EPS estimate over the next 12 months over time.
12 months EPS
Expected revenue growth rate
There's no question that a company's profit growth is the best indicator of its financial health, but nothing will happen if it doesn't make a profit. It's nearly impossible for a company to expand its bottom line without growing it over the long term. Therefore, it's important to know a company's earnings growth potential.
For Shopify, the current quarter's consensus revenue estimate of $1.83 billion represents a year-over-year change of +21.2%. Forecasts of $8.48 billion and $10.14 billion for the current and next fiscal year represent changes of +20.1% and +19.6%, respectively.
Last reported results and surprising details
Shopify reported revenue of $2.14 billion in its last reported quarter. This represents a +23.6% year-over-year change. EPS for the same period was $0.34, compared to $0.07 a year ago.
The reported earnings represent a surprise of +3.66% when compared to the Zacks Consensus Estimate of $2.07 billion. EPS surprise was +9.68%.
The company beat consensus EPS estimates in each of the trailing four quarters. The company has surpassed consensus revenue estimates every time during this period.
evaluation
You cannot make efficient investment decisions without considering stock valuation. To predict a stock's future price performance, it is important to determine whether the current price accurately reflects the intrinsic value of the underlying business and the company's growth prospects.
Compare the current value of a company's valuation multiples, such as price to earnings (P/E), price to sales (P/S), and price to cash flow (P/CF), to its own value, while also Value helps determine whether a stock is fairly valued, overvalued, or undervalued, and by comparing a company to its peers based on these parameters, you can determine whether a stock is reasonably priced. I can understand the gender.
As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) categorizes stocks into five groups, ranging from A to F, with A being B B is better than C, and so on), and can help identify whether a stock is overvalued, fairly valued, or temporarily undervalued. Masu.
Shopify is rated F on this score, indicating that it trades at a premium compared to its peers. Click here to see the values of some of the metrics that determined this grade.
conclusion
The facts discussed here, and a lot of other information about Zacks.com, may help you decide whether the market buzz about Shopify is worth paying attention to. However, the company's Zacks Rank #3 suggests it could outperform the broader market in the near term.
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