Shares of Shopify could spike after Q2 results, Paradigm Capital says

Paradigm Capital analyst Kevin Krishnaratne thinks Shopify’s (Shopify Stock Quote, Chart, News: TSX, NYSE:SHOP) second quarter results and third quarter guidance could be better than expected.

On Tuesday, August 1, Shopify will report its Q2, 2017 results. Krishnaratne expects the company will post a non-GAAP operating loss of $7.5-million and gross profit of $78.2-million on revenue of $144.8-million. This compares to the street consensus of a loss of $6.8-million and gross profit of $78.7-million on a topline of $143.9-million.

The Paradigm Capital analyst says he will be watching Shopify’s Q3 guidance as closely as the Q2 results.

“Heading into Q2 reporting on August 1, we remain positive on shares of Shopify, and like the odds of a beat on revenue and gross profits and a corresponding positive move in the share price,” Krishnaratne says. “Outside of better-than-forecast results, we see upside to the stock on the back of potential increases to the 2017 outlook, clarity on both Q3 guidance and what will be implied Q4 outlook, and the prospect of any disclosures related to Plus uptake, new partnerships, channel launches, or new merchant services. Potential M&A on the horizon given the company’s recent equity raise and now ~$1B in cash on the balance sheet remains a wild card that could drive even further upside.”

In a research update to clients today, Krishnaratne maintained his “Buy” rating and one-year price target of (U.S.) $100.00, implying a return of 7 per cent at the time of publication.

Krishnaratne thinks Shopify will generate Adjusted EBITDA of negative $1.8-million on revenue of $637.8-million in fiscal 2017. He expects those numbers will improve to EBITDA of positive $35.2-million on a topline of $884.5-million the following year.