Shopify is accelerating new merchant additions on a sequential basis in the third quarter but growth initiates are likely to cap near-term margins and take rates, as discussed in a recent note from analysts at Oppenheimer. The e-commerce platform is strategically investing marketing dollars in the acquisition of new merchants, aiming to capture a larger market share ahead of a potential macroeconomic rebound, according to a report that included insights from analyst Ken Wong. Wong emphasized that effective marketing is yielding a growing number of merchants, which we believe is slightly surpassing the growth seen in the second quarter.
The gross merchandise volume (GMV) of Shopify, which reflects the total dollar amount of orders facilitated through its merchants, saw an impressive increase of 22% year over year, reaching $67.25 billion in the second quarter. Management appears to be avoiding optimization for immediate take rates, given the elevated enterprise, point of sale, and international growth sources of pressure that are expected to ease over time along with product attach strategies, as noted by Wong. A significant development for Shopify is its expanded partnership with PayPal, which may provide Shopify with greater negotiating leverage.
Under the revised agreement, PayPal is set to function as an additional online card processor for Shopify Payments in the United States. This development, with PayPal Wallet transactions now included in gross payments volume, should positively impact take rates and overall revenue. According to Shopify's latest reporting, gross payments volume accounted for 61% of its GMV in the second quarter, a rise from 58% in the same quarter of 2023. Looking ahead, Oppenheimer is projecting adjusted earnings per share (EPS) of $0.31 for the third quarter, indicating growth compared to $0.24 from the previous year and $0.26 reported last quarter.
Analysts surveyed by Capital IQ anticipate normalized EPS of $0.27 on average for the ongoing quarter. The brokerage's revenue target aims for sequential and year-over-year growth to $2.1 billion, aligning with consensus views amongst market analysts. Current stock price stands at $79.60 with a change of +0.88, reflecting a percent change of +1.12..