Shopify (SHOP -0.99%) has long been an investor favorite, and it's easy to see why. It controls a large portion of the U.S. e-commerce market, even though you won't always see its name on the merchant websites it powers. You also won't see it listed as one of the top e-commerce retailers because its core business is e-commerce platform services.

Amazon is still the top online retailer with a 38% share of the total e-commerce market in the U.S., but Shopify's gross merchandise volume (GMV) has almost matched Amazon's online and third-party sales in some quarters. Shopify's GMV calculates the value of transactions across its millions of merchant clients, so it's an under-the-radar leader in e-commerce.

Shopify stock initially fell after Amazon announced its Q4 results on Feb. 6, but the company releases its own year-end 2024 results on Feb. 11. Should you buy Shopify stock before it reports?

A growing e-commerce market

E-commerce continues to increase as a percentage of retail sales. The Boston Consulting Group expects it to reach 41% of all retail sales globally by 2027, growing at a compound annual growth rate (CAGR) of 9%. As the largest U.S. e-commerce platform with 30% of the U.S. market, according to Statista, Shopify is primed for organic growth.

All online retailers need the kinds of services Shopify provides. The company started out serving small businesses, but it has expanded to offer competitive single services for large enterprise clients, which are more lucrative. It counts names like Reebok and Unilever as customers, and such deals have expanded its addressable market.

Past performance and guidance

Shopify reported blowout results for Q3 2024, and investors are enthusiastic about what it can do going forward. It had suffered a profitability setback several years ago after overextending the business to meet pandemic-induced demand that eventually waned. It took time to regroup and restructure, though, and is now scaling profitably.

In the third quarter, revenue increased 26% year over year, and it generated $421 million in free cash flow at a margin of 19%, up from $276 million and a 16% margin in 2023.

For the fourth quarter, management is guiding for:

• Mid-to-high-20s percent revenue growth
• Gross profit increase similar to the third quarter (24%)
• Operating expenses to be 32% to 33% of revenue
• Stock-based compensation of $120 million
• Free-cash-flow margin similar to the third quarter (19%)

Meanwhile, Wall Street is expecting 27% revenue growth to $2.73 billion and $0.43 in earnings per share.

What could happen on Feb. 11

Shopify has beaten EPS estimates for the past three quarters, but its stock didn't reflect that after each report. Earnings beats are one important factor that can affect how the market reacts, but guidance is another. Amazon just beat estimates for its fourth quarter -- and by a wide margin -- but the stock sank on a disappointing outlook.

Amazon said its weak outlook was due to the negative impact of foreign exchange, and Shopify is susceptible to this headwind too. International markets represent some of its strongest growth opportunities.

Focus on the long term

As a rule, the earlier you invest, the more you can give your funds time to compound and grow. Time in the market beats timing the market, so you shouldn't obsess over how a stock moves immediately following an earnings report.

That said, Shopify could be especially sensitive to any negative news because it's already trading at a premium valuation. There are high expectations built into its forward price-to-earnings ratio of 61. Regardless, if you believe in Shopify's opportunities and execution, it matters little whether you invest today or next week assuming you're in it for the long run.