Morgan Stanley anticipates Shopify's (SHOP.US) second quarter report: GMV growth rate may reach 23%, revenue will exceed expectations.

Shopify (SHOP.US) will announce its second quarter earnings before the US market opens on Wednesday. Prior to this, Morgan Stanley released a forward-looking analysis. Morgan Stanley pointed out that the company had a strong first quarter performance, with stable macroeconomic data and enhanced flexibility in its agent business model, making it perform significantly better than the broad software sector. Morgan Stanley expects various fluctuations and changes in the market in the second quarter, but remains optimistic due to its steady long-term layout. Morgan Stanley gives Shopify a "hold" rating with a target price of $112. Healthy and stable market demand trends indicate significant revenue growth in the second quarter. Given that Shopify stocks typically trade around macroeconomic data points, any concerns about consumer or overall economic longevity could make investors more cautious about the stock. From this perspective, tariff issues and political tensions with GEO Group Inc intensified in the first quarter, leading to Shopify stocks experiencing unprecedented panic fluctuations recently. In this context, strong first-quarter performance, cautious second-quarter forecasts, and "containment measures" on recent risks have led investors to regain confidence in Shopify's narrative. Therefore, with a 22% increase in stock price over the past three months (compared to a median increase of 3% in the broad software sector), the deviation in valuation is also diminishing, and Morgan Stanley acknowledges higher expectations for the second quarter. However, from a demand perspective, macro trends indicate: 1) Non-store sales: Maintained growth between 6% to 7% throughout the second quarter, consistent with the last month of the first quarter at around 7%, and slightly improved at the quarterly level (tracking data for the second quarter reached the mid-single-digit level, while the first quarter was at the low single-digit level); 2) Retail sales: Remained stable from May to June, making the level in the second quarter consistent with the first quarter of 2025; 3) Consumer confidence: Both the University of Michigan's Consumer Sentiment Index and the Business Roundtable Index show moderate improvement season by season. More importantly, the "expectations index" of the Conference Board indicates that consumer pessimism about future business conditions and the labor market has diminished, while expectations for future income levels have increased; 4) Consumer spending patterns: Morgan Stanley's surveys indicate that consumers' tendency to reduce spending due to proposed tariffs has decreased. Overall, the macro data in the second quarter has shown strong stability, and Morgan Stanley's overall expectations have not been affected by the "potential adverse factors in the current trade and macroeconomic environment." These factors together enhance confidence in the performance of this quarter. Specifically, assuming the stability of demand trends can total transaction volume comparable to the first quarter, Shopify's GMV (Gross Merchandise Volume) is expected to grow by approximately 23% year-on-year in the second quarter, about 100 to 150 basis points higher than the current general expectations (i.e. 21.5% year-on-year growth). In addition, a 23% year-on-year growth implies a quarter-on-quarter growth of about 10.5%, slightly lower than the seasonal average growth rate over the past two years (quarterly growth rate of 10.7%). Morgan Stanley expects the GMV outlook to be achieved, while the commission rate (approximately 2.31%, consistent with general expectations) will bring about a quarter-on-quarter revenue growth of around 26% to 27%, higher than the expected approximately 25% year-on-year growth and the management's guidance of "around 20%" revenue growth.