Shopify Stock: What Investors Should Watch Ahead of Q4 2024 Results

TradingKey - E-commerce is a booming industry. During the Covid-19 pandemic, it really took off but – in reality – even before 2020 global e-commerce revenue (as a total share of retail spend) had already been growing at a fast clip.

One of the biggest companies in the e-commerce space is digital storefront provider Shopify Inc (NYSE: SHOP). The company’s software and payments processing platforms has essentially “democratised” e-commerce and allowed anyone to start their own online store.

That has seen hundreds of thousands of merchants gravitate towards Shopify’s platform. It has also resulted in Shopify stock being a massive long-term winner, with its shares up over 4,000% since its 2015 IPO.

Shopify is set to report its Q4 2024 earnings on Tuesday (11 February) before the market open and, with its stock up close to 40% in the past year, investors will be interested to see how the company is doing. So, for e-commerce and tech investors, here’s what you should be watching ahead of Shopify’s earnings release. 

Shopify’s holiday quarter numbers under the microscope

Given the importance of the holiday season to Shopify, investors will be most focused on top line revenue growth for the e-commerce platform provider during the Q4 2024 period.

With Thanksgiving and Christmas falling in the fourth quarter, and Black Monday sales starting earlier and earlier (now in October), the final quarter of 2024 is typically seen as a big bellwether of the health of the US consumer.

That also broadly applies to the global consumer as well given the amount of goods that are shipped during Christmas and Black Monday sales globally. 

The good news for Shopify is that the company already released its Black Monday & Cyber Monday (BFCM) sales with merchants on its platform processing US$11.5 billion in sales over the BFCM weekend – up an impressive 24% year-on-year from BFCM in 2023.

Top line growth to be mid- to high-20s

When Shopify released its Q3 2024 results in mid-November, the company’s shares soared by over 20%. That was because the company had blown away expectations by posting revenue growth of 26% year-on-year for the period.

Even better, Shopify had also guided for a strong holiday quarter (Q4 2024) by saying that it expected revenue growth to be in the mid to high 20s range on a year-on-year basis. That beat analysts’ average expectation for 23% year-on-year top line growth.

The company’s ability to attract larger merchants to its platform is also a recent trend which has investors more bullish on Shopify. For example, giant toys brand Mattel Inc (NASDAQ: MAT) is using Shopify to sell two of its brands – American Girl dolls and Mattel Creations.  

What should investors be monitoring?

Besides the obvious top line growth and holiday quarter numbers, investors should be on the lookout for how Shopify’s payment systems – Shopify Payments and Shop Pay – are performing and helping drive traffic to its merchants.

For Q3 2024, Shopify Payments processed US$43 billion in gross payment volume (GPV) which was up 31% year-on-year. Meanwhile, Shop Pay – which is a secure one-tap checkout option – was used for US$17 billion worth of gross merchandise value (GMV) during Q3 2024, up 42% year-on-year.

This virtuous flywheel for Shopify is what is driving growth and investors will want to see similarly strong numbers come Tuesday morning. 

Where next for Shopify stock?

Given Shopify had decided to abandon its ambition in the wildly capex-heavy logistics business, the market has rewarded the company with a rising share price.

However, with expectations high heading into this earnings print, any small miss on the top line could result in Shopify shares getting hammered.

Shopify shares have rarely traded at a cheap valuation, though, and its current price-to-earnings (PE) ratio of 110x doesn’t suggest that it’s exactly at an “attractive” entry level for investors. Despite that, though, the potential for a beat also remains a possibility given how resilient the US consumer has been.

Finally, investors should watch to see what management says about the recent tariff threats by President Trump and how this could impact the broader e-commerce sector given Shopify merchants’ reliance on manufacturing and production from around the world.