Last week saw the newest third-quarter earnings release from Shopify Inc. (NYSE:SHOP), an important milestone in the company's journey to build a stronger business. Revenues of US$391m arrived in line with expectations, although losses per share were US$0.64, an impressive 121% smaller than what broker models predicted. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for Shopify from 28 analysts is for revenues of US$2.1b in 2020, which is a sizeable 49% increase on its sales over the past 12 months. Losses are expected to increase substantially, hitting US$1.02. per share. Before this latest report, the consensus had been expecting revenues of US$2.1b and US$0.93 per share in losses. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the earnings per share expectations following these results.
As a result, there was no major change to the consensus price target of US$357, with analysts implicitly confirming that the business looks to be performing in line with expectations, despite higher forecast losses. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Shopify, with the most bullish analyst valuing it at US$481 and the most bearish at US$170 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Next year brings more of the same, according to analysts, with revenue forecast to grow 49%, in line with its 47% annual growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 11% next year. So it's pretty clear that Shopify is forecast to grow substantially faster than its market.
The Bottom Line
The most obvious conclusion is that analysts made no changes to their forecasts for a loss next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Shopify's revenues are expected to grow faster than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Shopify going out to 2023, and you can see them free on our platform here..
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
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