Ecommerce store shoppers

Shopify (SHOP) Q2 gains from strong merchant base

Shopify SHOP is expected to have benefited from the expansion of its merchant base in the second quarter of 2022, which is expected to be released on July 27.

The accelerated adoption of Shopify products such as Shop Pay, Shop Pay Installments and Shopify Balance is likely to have boosted the company’s revenue in the quarter ahead.

However, revenue growth is expected to have suffered from the lack of government stimulus and slower e-commerce growth compared to the COVID-triggered acceleration in the prior year quarter.

Revenue from Shopify Inc. (TTM)

Revenue from Shopify Inc. (TTM)

Shopify Inc. revenue-ttm | Shopify Inc. Quote

Click here to learn how Shopify’s overall second quarter results will be.

Strategic integrations drive insights

Increased focus on expanding its merchant base to take advantage of the e-commerce boom is expected to have helped Shopify’s performance in Q2 2022.

In the first quarter of 2022, gross merchandise volume (GMV) increased 16% year-over-year to $43.2 billion. The trend is expected to have continued in the quarter ahead.

Shopify’s rich partner ecosystem may also have acted as a driver of growth in the quarter ahead.

This Zacks #3 (Hold) company has made strategic integrations with large technology companies to provide new services, such as Twitter TWTR sales channel, AppleiPhone tap-to-pay AAPL functionality and AlphabetIntegration of local GOOGL inventory with Google. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Twitter sales channel allows merchants to connect with consumers directly from their Twitter profiles. Shopify noted that this is the first time a commerce platform has partnered with a social media company.

Integration with Apple allows shoppers to use Apple smartphones against the terminal to pay for goods. While it may not be a new feature in retail, Apple’s recent Pay Later installments have added a whole new dimension to retail marketing.

Shopify’s Google feature syncs local inventory data with the Shopify platform to notify customers when a particular product is in stock.

In the last reported quarter, gross payment volume (GPV) reached $22 million, constituting 51% of GMV.

Zacks’ consensus estimate for GPV is $25.2 million, indicating growth of 24.5% over the figure reported in the year-ago quarter.

GPV in the reporting quarter is expected to have been driven by strong merchant performance on Shopify Payments, new merchant adoption, Shop Pay penetration gains and increased merchant payment penetration.

Zacks consensus estimate for Merchant Solutions revenue is $980 million, indicating growth of 24.8% over the prior year quarter.

Growth in the subscription solutions market in the upcoming quarter is expected to have been driven by more global merchants joining Shopify, aggressive investments in sales and marketing, and the introduction of new business initiatives.

The subscription solutions revenue consensus mark is pegged at $365 million, suggesting 9.3% growth over the prior year quarter.

Stay on top of upcoming earnings announcements with Zacks Earnings Calendar.

Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report

Apple Inc. (AAPL): Free Stock Analysis Report

Twitter, Inc. (TWTR): Free Stock Analysis Report

Alphabet Inc. (GOOGL): Free Stock Analysis Report

Shopify Inc. (SHOP): Free Inventory Analysis Report

To read this article on Zacks.com, click here.

Zacks Investment Research