Shopify (TSX:SHOP)(NYSE:SHOP) stock has been on a tear lately. Last week, it surpassed $2,000 for the first time, making Tobias Lütke Canada’s richest founder. Tomorrow, the company is set to release earnings for the second quarter. If it beats what Wall Street is expecting, then the stock is likely to soar again.
This naturally leads to the question, how high can this stock go?
Several U.S. tech giants have market capitalizations above $1 trillion. Shopify is seen as being in the same league as these companies, yet its market cap is “only” $250 billion. If Shopify truly is “the next Amazon (NASDAQ:AMZN),” as it is often claimed to be, then it should join the $1 trillion club eventually. The question is, when?
What it would take for Shopify to reach a $1 trillion market cap It would take an approximately 300% price increase from today’s level for Shopify to reach a $1 trillion market cap (in Canadian dollar terms). That’s based on the following simple calculations:
- Shopify’s market cap today: approximately $250 billion.
- $1 trillion minus $250 billion: $750 billion.
- $750 billion divided by $250 billion: three.
- Three times 100: 300.
Earnings coming out tomorrow If you’re interested in whether Shopify can keep up its hot gains and reach a $1 trillion market cap, you’re going to want to pay attention to the news tomorrow.
Shopify is set to release its earnings for the second quarter, and it’s going to reveal a lot of valuable information:
- Revenue: A lot of analysts think Shopify’s revenue growth is going to decelerate with COVID-19 fading into the rearview mirror. Tomorrow’s release will shed light on that.
- EPS: Analysts are expecting $0.97 in EPS for the quarter, tomorrow we’ll get to find out whether SHOP hits or misses that metric. It will be interesting to see how Shopify’s investment in Affirm impacts earnings, because the shares were down in Q2.
- Misc. operational data: Shopify’s release will include a smattering of operational data including gross transaction volume, number of vendors, and more. These aren’t GAAP metrics, but they’re seen as being relevant to e-commerce companies, so they’ll be worth looking at.
The post Shopify (TSX:SHOP): The Next Trillion-Dollar Tech Stock? appeared first on The Motley Fool Canada.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Shopify. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2023 $1,140 calls on Shopify, short January 2022 $1,940 calls on Amazon, and short January 2023 $1,160 calls on Shopify.