Barron’s update….earnings next week.

Shopify (SHOP) stock price has more than doubled this year, though its rally has weakened in recent months. Guggenheim argues that the coming quarter could provide some upside — even if valuations still look stretched.

The back story. Shopify(SHOP) shares have jumped 128% in 2019, even after a recent pullback following the e-commerce company’s most recent earnings report, well ahead of the S&P 500’s 20% gain and the 33% rise in the Technology Select Sector SPDR exchange-traded fund (XLK).

The company’s results in August came in ahead of expectations, and bulls have pointed to Shopify’s(SHOP) new fulfillment center and the acquisition of warehouse automation firm 6 River Systems. The moves could position the company to become a true alternative to Amazon.com(AMZN) , especially if it can woo merchants with friendlier policies. Still, its shares have drifted lower in recent months — with some arguing the drop has gone too far.

What’s new. On Friday, Guggenheim analyst Ken Wong reiterated a Neutral rating on the shares, but argues that the setup for Shopify(SHOP) looks “reasonable” heading into the company’s third-quarter earnings report, due out on Tuesday.

While investors have recently been worried about Shopify’s(SHOP) merchant-solutions business in the face of softer payment-volume data, Wong suggests this is overblown. “Our small and medium business survey suggests the current demand trends across small and mid-sized merchants remains stable. E-commerce vendors continue to outpace traditional peers, ” he writes. “Our industry checks have been positive with expectations for gross merchandise value growth to mirror first half trends.”

Looking ahead. As for the upcoming quarter, Wong notes that Shopify’s(SHOP) long history of consistently beating guidance will have investors “still looking for meaningful upside to consensus revenue estimates…north of the upper end of the guidance range” even as the shares have drifted lower in recent months — though expectations may be somewhat tempered by recent results from eBay(EBAY) and Amazon(AMZN).

Any potential upside in the quarter will likely be from the merchant-solutions business, says Wong, where his estimates are above consensus. “That said, we expect any top line surprise to deliver some flow through to operating income and drive earnings per share ahead of our 12 cent estimate,” he writes. But he remains on the sidelines due to valuation.

Shopify (SHOP) stock is down 2.4%, at $315.50, in recent trading. The S&P 500 is up 0.15%.