E-commerce platform Shopify Inc (NYSE:SHOP) is due to report second-quarter earnings Wednesday morning.

Here’s what investors need to know.

Shopify Looks To Rebound

JPMorgan’s analysis of the company’s upcoming second-quarter 2024 earnings, due during Tuesday’s pre-market session, highlight a pivotal moment for the company, as its shares have dropped sharply since the first-quarter 2024 report on May 8.

Lead analyst Reginald L. Smith, CFA, and team note investors are looking for clarity on whether Shopify can maintain over 20% growth medium-term despite potential macroeconomic challenges, and whether management is prepared to cut operational expenditures to boost margins if necessary.

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Market Doubts vs. Growth Hopes

Currently trading at about 7x forward sales, a 12-month low, Shopify’s valuation suggests the market isn’t fully recognizing its growth or cost-control potential, which may limit further downside. However, JPMorgan expresses concerns about the Street’s forecasted 21% revenue growth for third-quarter 24 and a 230 basis point increase in adjusted operating margin for 2025, suggesting these targets might be optimistic.

For the second quarter, JPMorgan anticipates 18% year-over-year revenue growth, driven by a 21% rise in subscription revenue, with an adjusted operating margin of 11.7%, both in line with Street expectations. Despite slowing growth in GMV and GPV, Shopify is expected to continue increasing GPV penetration among merchants.

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What Else?

Given the recent, significant share price drop, JPMorgan suggests Shopify might be an attractive buy post-earnings if management effectively manages operational levers to counter growth deceleration.

J.P. Morgan rates Shopify as Overweight with a $74 price target by December 2025, representing a 42% upside. This valuation assumes a 13x forward sales multiple for the subscription business and a 15x forward gross profit multiple for merchant services, implying a 9x blended forward revenue multiple.

Risks to this outlook include adverse consumer and macroeconomic sentiments, slower GMV/GPV growth, potential data breaches, high marketing and R&D costs without immediate returns and slower market penetration.

According to data from Benzinga Pro, SHOP has a 52-week high of $91.57 and a 52-week low of $45.50.