Shopify Merchant Feedback Paints Bullish Picture For Q2, Roth Capital Says In Earnings Preview

Shopify Inc SHOP is set to report second-quarter results July 31 that could should show a "healthy" merchant business, according to Roth Capital Partners. 

The Analyst

Analyst Darren Aftahi maintained a Buy rating on Shopify with a price target lifted from $165 to $192.

The Thesis

Roth Capital's firsthand checks and conversations with approximately 90 merchants who use Canada-based Shopify's platform bode well for the company's upcoming earnings report and warrant an incrementally bullish stance on the stock, Aftahi said in a Tuesday note. (See the analyst's track record here.)

The analyst shared the following takeaways from Roth Capital's conversations with Shopify merchants: 

• Respondents who use Shopify's Merchant businesses saw a median growth rate of 48 percent year-over-year.
• 79 percent use Shopify's payments platform, a flat number from one year ago.
• 37 percent use Shopify's shipping solutions, up from 35 percent last quarter.
• Twelve users said they're seeing a positive impact from integration with Instagram.
• 30 merchants signed up for integration with Amazon.com, Inc. AMZN and are bullish on those prospects.

Shopify is expected to report the following in its Q2 print, Aftahi said: 

• Revenue growth of around 54 percent to $233.8 million.
• Non-GAAP EPS of negative 4 cents.
• Subscription solutions growth of 47 percent year-over-year.
• Merchant solutions growth of 60 percent.
• A gross margin decline of 100 basis points to 56.5 percent amid investments in the cloud and other initiatives.
• Total operating expense growth in-line with historical levels at 59 percent.
• A 50-percent increase in gross merchandise value to $8.8 billion.

Price Action

Shopify shares hit a new all-time high of $176.60 Tuesday morning and were trading down 1.45 percent to $170.75 at the time of publication. 

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