The Zacks Computer and Technology Sector has tumbled in 2022 amid a hawkish pivot from the Federal Reserve, down more than 30% and widely underperforming the general market.
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A widely recognized name in the realm, Shopify SHOP is on deck to unveil quarterly earnings on October 27th after the market close.
Shopify provides a multi-tenant, cloud-based, multi-channel e-commerce platform for small and medium-sized businesses.
Currently, the company carries a Zacks Rank #3 (Hold) with an overall VGM Score of a D.
How does the company stack up heading into the print? Let’s take a deeper dive.
Share Performance & Valuation
It’s been rough sailing for SHOP shares in 2022, down nearly 80% and widely underperforming the S&P 500.
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However, the heavy selling has slowed down over the last three months, with SHOP shares losing roughly 7% in value but still underperforming the general market.
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Shopify’s valuation multiples are undoubtedly steep, with the company’s 6.6X forward price-to-sales ratio representing a 109% premium relative to the Zacks Computer and Technology sector.
Still, the value is well below its 22.7X five-year median and highs of 48.0X in 2021.
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Quarterly Estimates
Analysts have primarily been bearish in their earnings outlook, with four negative earnings estimate revisions hitting the tape over the last several months. The Zacks Consensus EPS Estimate of -$0.07 suggests a Y/Y earnings decline of roughly 180%.
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However, Shopify’s top-line is in better standing; the Zacks Consensus Sales Estimate of $1.3 billion indicates a Y/Y improvement of nearly 19% from year-ago quarterly sales of $1.1 billion.
Quarterly Performance & Market Reactions
Shopify has fallen short of earnings estimates as of late, registering three bottom-line misses across its last four releases. In its latest print, SHOP reported a 200% EPS miss.
Revenue results are similar; SHOP has registered one top-line beat across its last four quarters. Below is a chart illustrating the company’s revenue on a quarterly basis.
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Expect shares to be volatile following the release; shares moved upwards by nearly 14% following its latest release and fell more than 20% in the quarter before.
Putting Everything Together
SHOP shares have tumbled in 2022 amid a hawkish pivot from the Fed, underperforming the general market by a wide margin.
Valuation multiples are stretched but are well below their historical values.
Analysts have been bearish in their earnings outlook, and estimates suggest a Y/Y decline in earnings but an uptick in revenue.
The company has fallen short of quarterly estimates as of late, and shares have typically witnessed large price swings following the prints.
Heading into the release, Shopify SHOP carries a Zacks Rank #3 (Hold) with an Earnings ESP Score of 85%.
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