Shopify Inc. (SHOP) has rallied by 17% in pre-market on reporting impressive financial results for the second quarter ended June 30, 2024. The company’s revenue soared 21% to $2.0 billion, marking an even more robust 25% increase when adjusting for the sale of its logistics businesses. This revenue bump reflects Shopify’s solid grip on global commerce.
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Gross profit also experienced a substantial boost, climbing 25% year-over-year to $1.0 billion. This increase was largely driven by Shopify’s streamlined operations and the positive effects of exiting the logistics sector. As a result, the gross margin for the quarter reached 51.1%, up from 49.3% a year earlier. Additionally, earnings per share (EPS) for the quarter came in at $0.26, surpassing the analysts’ consensus estimate of $0.20.
SHOP’s Cash Flow & Market Position
One of the standout figures from Shopify’s earnings report was its free cash flow, which more than doubled to $333 million, translating to a free cash flow margin of 16%. This impressive margin showcases Shopify’s efficiency and financial health
“Our Q2 results make it clear: Shopify is rapidly strengthening its position as a leading enabler of global commerce and entrepreneurship,” said Harley Finkelstein, Shopify’s President. This sentiment was echoed by CFO Jeff Hoffmeister, who highlighted the company’s ability to achieve significant growth in GMV (Gross Merchandise Volume), which increased 22% to $67.2 billion.
Shopify Segment Performance
Breaking down the segments, Merchant Solutions revenue grew 19% to $1.5 billion, driven by a surge in GMV and increased use of Shopify Payments. Subscription Solutions revenue also saw a 27% rise to $563 million, fueled by a growing merchant base and pricing adjustments. However, the company faced challenges with ongoing pressures in payments and reimbursement.
Shopify’s Outlook
For the third quarter of 2024, Shopify anticipates revenue growth in the low-to-mid-twenties percentage range year-over-year. The company expects a gross margin increase of about 0.5% compared to Q2 2024 and forecasts GAAP operating expenses as a percentage of revenue to be between 41% and 42%. Stock-based compensation is projected at $120 million, and Shopify aims to maintain a free cash flow margin similar to Q2 2024, with double-digit margins expected for the rest of the year.
Is Shopify a Buy or Hold?
Analysts remain cautiously bullish about SHOP stock, with a Moderate Buy consensus rating based on 18 Buys and 14 Holds. Over the past year, SHOP has decreased by almost 6%, and the average SHOP price target of $76.40 implies an upside potential of 41% from current levels. These analyst ratings are likely to change following SHOP’s results today.
