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In the dynamic world of e-commerce, Shopify (SHOP) stands out for its ability to exceed profit expectations. But what are the factors underlying this exceptional performance? Let’s dive into the analysis to understand why Shopify is poised to outperform estimates and make a mark in the world of digital commerce.
Shopify’s positive track record
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Shopify, a cloud-based commerce company, has a well-established history of beating profit forecasts. Over the past two quarters, it has maintained an average surprise of 17.34%, making it a robust candidate to continue this trend.
Significant earnings surprise
For the most recently reported quarter, Shopify reported earnings of $0.20 per share, beating the Zacks Consensus Estimate of $0.16 per share, a surprise of 25%. In the previous quarter, the company also surprised with earnings of $0.34 per share compared to expectations of $0.31 per share, a surprise of 9.68%.
To read Analysis of how Shopify (SHOP) outperformed the stock market today
Favorable change in earnings estimates
This success story has contributed to a favorable change in earnings estimates for Shopify. Currently, the Zacks Earnings ESP for Shopify is +11.72%, suggesting that analysts have become bullish on the company’s earnings prospects. This positive ESP, combined with a Zacks Rank #3 (Hold), indicates a strong possibility of further positive surprises.
The impact of the earnings ESP
Our research shows that stocks with a combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. That means if you have 10 stocks with this combination, about seven of them could beat consensus estimates.
Role of analysts in estimates
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. Analysts revising their estimates just before an earnings release have the most recent information, which could be more accurate than earlier predictions.
Quarter
Consensus Estimate
Actual Results
Surprise
Last trimestre
$0.16
$0.20
25%
Previous Quarter
$0.31
$0.34
9.68%
Implications for investors
It is imperative for investors to monitor a company’s Earnings ESP ahead of the quarterly release to increase their chances of success. While many companies beat earnings estimates, not all of them necessarily see their shares rise. Likewise, some stocks remain stable even when they miss consensus estimates.