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Discussion Starter #1
Is anyone concerned about the growth of shopify? Is this another nortel? It is apparently the second largest public traded company behind royal bank.
 

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That is crazy. I looked it up because I found your stat hard to believe, and it looks like it's the 3rd behind RY and TD.

Feels a little out of proportion to me. They are a money-losing business so far. Of course, Amazon started off that way too, so perhaps it's not totally crazy. But I certainly wouldn't put any huge amount of money into it myself (aside from what I get from my index funds, of course).
 

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Same herd effect as for Amazon. Granted Shopify is doing well since they have had a surge in business customers going 'online' to sell their goods due to the shut down. But that growth is based on a spurt that will flatten out as soon as the economy re-opens. My belief is most retailers will now keep a presence online now that they have expended the resources to get online, but it doesn't mean rate of growth is sustainable. Investors have a habit of projecting growth out indefinitely like analysts do. Very poor forecasters..

IMO, current valuation is thus a 'flash in the pan' and it will settle back to more insane, rather than extremely insane, levels. That said, I don't think it is another Nortel. Online commerce is here to stay and the Shopify model is likely more sustainable than the Amazon model that is mostly authoritarian in style for its 3rd party resellers.
 

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Related thread under Individual Stocks: Shopify SHOP-T

I don't think one should rule out that this could be a big force in a brand new economic shift. I think questions like this are very exciting... is SHOP's #2 or #3 TSX market valuation justified? Is it stupid greed/momentum, or is the market on to something you haven't figured out yet?

Past examples where people got this wrong were Google and Amazon. Both were widely thought to be overvalued, but turned out to become industrial giants and eventually monopolies.

The COVID-19 incident could be the nail in the coffin for much of the 'physical' economy. This economy was already very questionable ever since 2000, with repeated disasters (manufacturing, Bombardier, car makers, retail shopping) over these decades. The traditional, physical economy has been deteriorating for 20 years.

SHOP could be one of those companies that's key to transforming retail into the new era, and could be indispensable as a result. I'm not sure I believe that, but it's possible.
 

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I spent a few years at TDAM during my career. The Canadian Equity fund managers talked about RIM everyday. ”they’re a leader...they’re ubiquitous....there are 6 billion potential clients”. This was back 10-12 years ago.

i wouldn’t hang my hat on the fact that online commerce is here to stay. Seems Canadian hi-flying tech companies don’t have the greatest track records. Hoping Shopify is the outlier......simply to have a Canadian success story.
 

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There's nothing that SHOP does that couldn't be replicated by anyone else relatively easily. Especially by companies like Goog and Amzn. Infact, SHOP uses both AWS and Google cloud services for it's back end stuff.

I've been using SHOP for my store for almost 2 years now. No issues and the interface is seamless. I'm just on the basic plan ($29/mo), I think you'd need ot have $200K/yr sales before the next rung up made sense.
 

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SHOP is a vehicle for online sales so it has seen a surge in new clients who needed to get online to get some cash flow. What I am saying is that most who have signed up for accounts because of the crisis will stay BUT will there actually be continued surge in growth of NEW customers once the economy re-opens? If one has not already signed up to stay in business now, why sign up this Fall or next year?
 

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Past examples where people got this wrong were Google and Amazon. Both were widely thought to be overvalued, but turned out to become industrial giants and eventually monopolies.
Amazon perhaps; although Amazon has a much, much longer history of sustained revenue growth and better net margins. And they have been making money in recent years, and have been sustaining increases in retained earnings with no equity issuances. Shopify issues a lot of shares to fuel their growth and their losses are significantly higher than Amazon.

But not Google. Google has never really gotten out of hand; they went public well after the dot com crash. And they were making net profits before they went public. Google has rarely traded above a P/E of 25 and that is with 10-20% revenue and profit growth; very reasonably priced. Shopify doesn't have profits 5 years after going public and many new share raises later.

Everyone is happy as long as Shopify's stock goes up every year, sometimes 50% to 100% a year. You can do no wrong.
 

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Discussion Starter #9
My concern is more its impact on an index fund like xic if it crashes. It is indeed third after TD when i look at the holdings. I guess it won't crash for awhile. This is why i'm glad i hold mawer canadian equity as they only weight it 2.5%
 

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Discussion Starter #10
Thanks for your responses. I didn't know anything about shopify. Maybe i shouldn't be so cynical of a canadian success story.
 

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I have considered holding some XIT to address this possibility: what if the Canadian economy's future really is much more electronic than we think. What if software/services turn out to be the most durable companies of the next decade?

If you look at XIT's holdings, SHOP is not the only stock which has been strong for many years. CSU, GIB.A, OTEX, DSG, KXS have all been very strong for at least 5 years... this sector has simply been on fire.

Currently I don't hold XIT, but instead hold some selected tech stocks (GIB.A and CSU) in my Growth portfolio. This has worked out well, so I'll probably keep doing that.

My concern is more its impact on an index fund like xic if it crashes. It is indeed third after TD when i look at the holdings. I guess it won't crash for awhile. This is why i'm glad i hold mawer canadian equity as they only weight it 2.5%
I'm more concerned about the big banks crashing, since they are a huge % of the index. They are highly leveraged companies with bad loan exposures, so I think they could take the index down a lot.
 

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Speaking of Bombardier ( I think it's interesting if I mention that they were requesting more government help a week ago)


The once Canadian industrial multi-national giant Bombardier is in trouble again.
After over extending itself, the Canadian rail and aircraft maker, had do divest itself of almost all its holdings, designs, and divisions to help pay off crippling debt.

*they're planning on ''sealing the deal'' in 2021 with Alstom. So I'd wait until that's done because right now, it's not near the steal it will be at that point;)


Alstom expects to close its deal with Bombardier, which is subject to regulatory clearance, in the first half of 2021.
 
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