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| Shopify (SHOP) Earnings Expected to Grow: What to Know Ahead of Next Week's Release |
Wall Street Anticipates Earnings Surge for Shopify in Q3 2023
Shopify (SHOP) is expected to announce its Q3 2023 results soon, and Wall Street is eyeing a promising year-over-year increase in earnings, driven by higher revenues. While the consensus outlook provides a crucial benchmark for assessing the company's earnings, the actual results' alignment with these estimates can significantly influence the stock's short-term performance.
The stock may experience an upward surge if it outperforms these key figures in the upcoming earnings report, scheduled for November 2. Conversely, any underperformance may lead to a decline in its stock value.
The sustainability of these price changes and future earnings expectations relies largely on the insights shared by management during the earnings call. Nevertheless, it's vital to evaluate the likelihood of a positive EPS surprise.
Zacks Consensus Estimate
Shopify, a prominent cloud-based commerce company, is projected to report quarterly earnings of $0.15 per share in the upcoming release, signifying an impressive year-over-year change of +850%.
Revenue is expected to reach $1.66 billion, reflecting a substantial 21.6% increase from the same period in the previous year.
Estimate Revisions Trend
In the last 30 days, the consensus EPS estimate for the quarter has been raised by 3.11%, underscoring how analysts have collectively revised their initial forecasts.
However, it's crucial to remember that an overall change might not always reflect the direction of individual analysts' estimate revisions.
Earnings Whisper
The Zacks Earnings ESP (Expected Surprise Prediction) model is designed to leverage estimate revisions leading up to a company's earnings announcement, offering valuable insights into the business conditions for that period. This model compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the former being the latest version of the consensus EPS estimate. The premise is that analysts adjusting their estimates just before an earnings release might possess more accurate information than previous predictions.
A positive Earnings ESP reading theoretically indicates the potential deviation of actual earnings from the consensus estimate, but it is particularly powerful for predicting positive earnings surprises when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold). Research shows that this combination yields a positive surprise nearly 70% of the time, and a solid Zacks Rank enhances the predictive power of Earnings ESP.
Conversely, a negative Earnings ESP reading does not guarantee an earnings miss, and it's challenging to confidently predict a beat for stocks with negative Earnings ESP readings and/or a Zacks Rank of 4 (Sell) or 5 (Strong Sell).
Shopify's Numbers
As of now, Shopify's Earnings ESP stands at -7.69%, with the Most Accurate Estimate trailing the Zacks Consensus Estimate. This suggests that analysts have turned somewhat bearish on the company's earnings prospects. Nevertheless, the stock currently holds a Zacks Rank of #3.
This combination makes it uncertain whether Shopify will outperform the consensus EPS estimate.
Earnings Surprise History
Historically, analysts consider a company's ability to meet consensus estimates when formulating future earnings projections. Therefore, examining its surprise history can provide insights into its influence on upcoming numbers.
In the last reported quarter, Shopify was anticipated to post earnings of $0.06 per share but exceeded expectations by delivering earnings of $0.14, marking a significant surprise of +133.33%.
In the past four quarters, Shopify has surpassed consensus EPS estimates in three instances.
In Conclusion
While an earnings beat or miss is not the sole determinant of a stock's movement, it is a significant factor. Many stocks experience price fluctuations despite beating earnings estimates due to other factors that disappoint investors. Conversely, unforeseen catalysts can lead some stocks to rise even after an earnings miss.
With that in mind, considering stocks expected to surpass earnings expectations can improve the odds of success. However, investors should also consider other factors when making investment decisions regarding Shopify ahead of its earnings release.
Keep an eye on upcoming earnings announcements with the Zacks Earnings Calendar.
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