Should You Buy, Sell or Hold Shopify Stock Before Q1 Earnings?

Shopify SHOP is scheduled to report its first-quarter 2025 results on May 8.

For the to-be-reported quarter, Shopify expects revenues to grow at a mid-twenties percentage rate on a year-over-year basis.

The Zacks Consensus Estimate for revenues is currently pegged at $2.33 billion, suggesting growth of 25.24% from the year-ago quarter’s reported figure.

The consensus mark for earnings is pegged at 26 cents per share, unchanged over the past 30 days and indicating 30% growth from the figure reported in the year-ago quarter.

SHOP’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing in the remaining one, the earnings surprise being 22.08%, on average. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
 

Shopify Inc. Price and EPS Surprise

Shopify Inc. price-eps-surprise | Shopify Inc. Quote

Let’s see how things are shaping up prior to this announcement.

Key Factors to Note for SHOP’s Q1

Shopify is benefiting from strong growth in its merchant base, a trend that will likely be reflected in first-quarter results. In the fourth quarter of 2024, Shopify processed a cumulative Gross Merchandise Volume (GMV) of $1 trillion. GMV increased 25.7% year over year in fourth-quarter 2025, driven by same-store sales growth from existing merchants, driven by Plus merchants, growth in the number of merchants, strong international growth, and robust point of sale growth (26% GMV growth year over year). These same factors are expected to have driven GMV growth in the to-be-reported quarter.

The Zacks Consensus Estimate for first-quarter 2025 GMV is currently pegged at $75 billion, indicating 23% year-over-year growth.

Growing usage of Shop Pay is expected to have benefited Shopify in the to-be-reported quarter. New launches like Shopify Balance for Plus, next-day payouts, and availability of flexible payment options in Shopify Credit are expected to have improved cash flow management, driving more merchant adoption of Shopify solutions.

The consensus mark for first-quarter Subscription solutions revenues is pegged at $621 million, indicating 21.5% year-over-year growth. The Zacks Consensus Estimate for Merchant Solutions is pegged at $1.71 billion, suggesting 26.7% year-over-year growth.

SHOP Shares Outperform Sector, Industry

SHOP shares have declined 7.5% year to date (YTD), outperforming the Zacks Computer & Technology sector’s fall of 7.6% and the Zacks Internet Services industry’s drop of 11.3%.

SHOP Stock’s Performance

Shopify shares have outperformed industry peers, including Alphabet GOOGL, Eventbrite EB and The Trade Desk TTD. YTD, Alphabet, Eventbrite and The Trade Desk shares declined 13.3%, 36% and 52.8%, respectively.

Shopify Trading at a Premium

However, the Value Score of F suggests a stretched valuation for Shopify at this moment.

SHOP stock is trading at a premium with a forward 12-month Price/Sales of 11.1X compared with the industry’s 4.88X, Alphabet’s 5.92X, Eventbrite’s 0.65X and The Trade Desk’s 9.08X.

Price/Sales Ratio (F12M)

SHOP Stock to Ride Higher on Strong Merchant Base

Shopify’s long-term prospects are strong, given its growing merchant base and expanding partner base. The company currently commands 12% of the U.S. ecommerce market and continues to gain rapidly in Europe and Japan. International growth continues to outperform North America, reflecting Shopify’s expanding global presence. 

Expansion of Shopify Tax in the United Kingdom and European Union, and Tap to Pay in multiple countries, is positive in this regard. Tap to Pay is now available in multiple countries, including Australia, Germany, the Netherlands and the U.K., as well as merchants using Android devices. 

An expanding partner base that includes TikTok, Snap, Pinterest, Criteo, IBM, Cognizant, Amazon, PayPal, Roblox, YouTube, Target, Manhattan Associates, COACH, Oracle and Adyen is expected to expand its merchant base further. 

Shopify’s partnership with Amazon allows Shopify merchants to use the latter’s massive fulfillment network. SHOP became the first commerce integration partner for Roblox, which has, on average, more than 88 million daily active users. The company integrated its platform with the YouTube Shopping affiliate program and diversified its Payments product offering through the PayPal partnership.

SHOP Stock: Buy or Hold Ahead of Q1?

Shopify is benefiting from strong growth in its merchant base, international expansion and growing enterprise customer base. 

However, challenging macroeconomic conditions and new tariffs are expected to hurt SHOP’s near-term prospects. Benefits from both the PayPal wallet integration and expanding enterprise customer base are expected to occur in the later part of 2025. Stretched valuation is also a concern.  

Shopify currently has a Zacks Rank #3 (Hold), which implies investors should wait for a more favorable point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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