Shopify Q1 Likely Solid, But Analyst Says Tariff Commentary And Q2 Outlook Will Steer Investor Focus

JP Morgan analyst Reginald L. Smith reiterated the Overweight rating on Shopify Inc. SHOP, with a price forecast of $124.

The company said it would announce financial results for the quarter that ended March 31, 2025, before the markets open on Thursday, May 8.

Smith observed that the company’s shares have rebounded from their April lows and are now trading about 1% below President Trump’s so-called Liberation Day levels. This slightly underperforms the S&P 500, which is up less than 1% over the same period.

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This movement reflects investor reactions to evolving tariff policies and efforts to better assess Shopify's business exposure to China.

The analyst projects solid first-quarter 2025 results, supported by stable trends in e-commerce and retail spending after adjusting for the leap year effect.

However, investor attention is expected to shift toward the second-quarter guidance and management's commentary on how tariffs may impact merchants.

Smith estimates that small merchants on Shopify's Basic Subscription Plan could represent as much as 40% of monthly recurring revenue, or roughly 8% of annualized revenue, though they likely account for a smaller share of overall transaction volume.

The analyst writes that more clarity is sought regarding what portion of Shopify's merchant base, especially small and less sophisticated sellers such as drop shippers, maintains direct ties to China.

Smith anticipates that management's remarks on Shopify's merchant exposure to China, April performance trends, and short-term growth expectations will be the main drivers of the stock's movement following the earnings call.

Overall, Smith is projecting compounded annual growth rates of 20% for revenue and 29% for operating profit through 2026, placing Shopify near the top of its coverage list.

The analyst writes that this optimistic outlook is supported by the ongoing secular transition to e-commerce and the company's ability to scale its strategic growth initiatives effectively.

Price Action: SHOP shares are trading lower by 4.13% to $94.32 at last check Tuesday.

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