Why Shopify Inc. (SHOP) Is Gaining On Earnings Optimism Now

We recently compiled a list of the 5 Stocks Gaining On Earnings Optimism. In this article, we are going to take a look at where Shopify Inc. (NYSE:SHOP) stands against the other stocks.

The earnings season continues to move stocks higher as big names deliver their quarterly performance reports one by one. As a result, analysts are updating their models with the latest numbers, resulting in rating changes for these companies.

As the US indices struggle to find a specific direction in today’s trading, some stocks are clearly on an upward trajectory. We unearthed these stocks by looking at the recent earning reports, analyst upgrades, and the earnings calendar. To come up with the list of 5 stocks gaining on analyst expectations, we only considered stocks with a market cap of at least $75 billion.

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Shopify Inc. (NYSE:SHOP)

Shopify provides an e-commerce platform to people who want to sell products online. The company’s platform and services have been a global hit ever since the COVID-19 period. However, the stock has disappointed many after its fall in 2022, still trading 33% below its all-time highs.

While that disappointment is unlikely to change soon, there is reason to believe that the existing bull run, which has paused since November, could continue. The company’s earnings are expected to come out on the 11th of February and RBC Capital Markets analysts are optimistic about an earnings beat.

Analysts have confirmed that third-party data suggests an earnings beat on the back of improved margins. There is one warning sign though, and it has to do with the guidance. Shopify has a history of disappointing Q1 guidance with the stock declining 17% on average after Q4 earnings. We believe this risk is already priced in as the stock is trading at exactly the same level as on the day of Q3 earnings. The sideways movement during the last 2 months suggests investors are prepared for poor guidance and have therefore priced it in.

Overall SHOP ranks 1st on our list of the stocks that are gaining on earnings optimism. While we acknowledge the potential of SHOP as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as SHOP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.