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I'm stuck on valuation.

Okay, what's the projection for 5 year revenue, will the stock make sense then?
10 years? How much of the market do they need? How big a market will be?
 

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I want to buy SHOP but I'm currently waiting due to its valuation, even considering its revenue growth. I was waiting for $950 when it was near $1500 and dropped around $1150. Maybe I missed an opportunity. Now I'm waiting for $1050 or I'll readjust my target after earnings results. I have a very small exposure to SHOP through XIT.

I like FOOD, I'm watching it closely. I'm not sure about its D/E though. But otherwise I like it.

JD is on my watchlist, I'd definitely buy that one.
 

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I'm stuck on valuation.

Okay, what's the projection for 5 year revenue, will the stock make sense then?
10 years? How much of the market do they need? How big a market will be?
The are growing revenues at 40-50%/yr. They could become more like an Amazon w slightly lower growth but still growing revenue at 30%/yr after 15 yrs. Yes They have a winning platform for esellers. The ecommerrce market is huge~ $3.5T and growing at 18% /yr. Their sales are ~ $2B so lots of room for growth
 

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I want to buy SHOP but I'm currently waiting due to its valuation, even considering its revenue growth. I was waiting for $950 when it was near $1500 and dropped around $1150. Maybe I missed an opportunity. Now I'm waiting for $1050 or I'll readjust my target after earnings results. I have a very small exposure to SHOP through XIT.

I like FOOD, I'm watching it closely. I'm not sure about its D/E though. But otherwise I like it.

JD is on my watchlist, I'd definitely buy that one.
I grabbed SHOP when it fell to ~ $1200 in Sept. I don't think you'll get more than a 20% discount.

Another stock I am watching is Converge Technology Solutions, a small Saas company, after some favorable reviews on the Globe and other sources. It is small but growing sales at 50%/yr and P/S is just 2.99. And the small e health companies Cloud MD and Well health.
 

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The are growing revenues at 40-50%/yr. They could become more like an Amazon w slightly lower growth but still growing revenue at 30%/yr after 15 yrs. Yes They have a winning platform for esellers. The ecommerrce market is huge~ $3.5T and growing at 18% /yr. Their sales are ~ $2B so lots of room for growth
Total US sales were about $4T
.

Shopify revenue is 1.6B (2019)
at 45%/yr, thats 45B in 10 years, which is a HUGE chunk of todays US consumer market.

Lets say they have 10% net profit, so 4.5B, vs todays market cap of 120B, so 3% earnings yield at that time.

Yes there is the global sales, but Amazon, Alibaba & others aren't going to switch to shopify. Plus other competitors.
A google buyout makes a lot of sense, but $100B is high price.

Also Amazon "Alexa, order more toilet paper for 1 hour delivery" is something that Shopify won't match near term.


Very rough numbers, but Shopify has a valuation problem that I can't get over.
 

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Total US sales were about $4T
.

Shopify revenue is 1.6B (2019)
at 45%/yr, thats 45B in 10 years, which is a HUGE chunk of todays US consumer market.

Lets say they have 10% net profit, so 4.5B, vs todays market cap of 120B, so 3% earnings yield at that time.

Yes there is the global sales, but Amazon, Alibaba & others aren't going to switch to shopify. Plus other competitors.
A google buyout makes a lot of sense, but $100B is high price.

Also Amazon "Alexa, order more toilet paper for 1 hour delivery" is something that Shopify won't match near term.


Very rough numbers, but Shopify has a valuation problem that I can't get over.
I appreciate your concern and looked a this a little more. IMO these companies can't really be viewed w the dividend yield type model because their cost structures are entirely different than a typical blue chip dividend paying company.

Many are more or less scalable. Once the platform is built, there is little incremental cost to add new customers though there are some cost increases ( a little more sales, more data centers). That is why these companies see cash flows really increase as they get older w much of the new customers sales just flowing through to the bottom line. Add 46% in sales, adds 46% in earnings and the price just marches up 46% in keeping w the P/S multiple. You don't need to worry about yield when the stock is returning 46%/yr.

There are better tech investments out there though. Shopify has a P/S of 51, growing sales at ~ 50% ( though they warn this growth could decrease).

A new company like Converge for ex has a P/S of just .49 and is growing sales at 45% so there is much greater return potential w the 45%/yr from new sales + the P/S multiple expansion.
 

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I appreciate your concern and looked a this a little more. IMO these companies can't really be viewed w the dividend yield type model because their cost structures are entirely different than a typical blue chip dividend paying company.

Many are more or less scalable. Once the platform is built, there is little incremental cost to add new customers though there are some cost increases ( a little more sales, more data centers). That is why these companies see cash flows really increase as they get older w much of the new customers sales just flowing through to the bottom line. Add 46% in sales, adds 46% in earnings and the price just marches up 46% in keeping w the P/S multiple. You don't need to worry about yield when the stock is returning 46%/yr.

There are better tech investments out there though. Shopify has a P/S of 51, growing sales at ~ 50% ( though they warn this growth could decrease).

A new company like Converge for ex has a P/S of just .49 and is growing sales at 45% so there is much greater return potential w the 45%/yr from new sales + the P/S multiple expansion.
I think I agree... conceptually.

But even if they 10x sales, and keep costs the same, the valuation case is still tough for me, though it is getting there.

That's where I have trouble with the valuation.
Unlike Amazon, which I believe will swallow everything, until the government shuts them down.
 

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If so, its heading down the same path as Facebook. I certainly wouldn't want that to be the case. It undermines good tech.
I don't get it, so what, a few fraudsters use Shopify.

Did you know that all those fraudsters also use THE INTERNET!!!

They likely use SSL, and credit cards, maybe even Canada Post?
In fact they likley use the exact same stuff everyone else does.


Do you think anyone is going to stop using Ontario Cannabis Store because of this?

So why, is this a problem for Shopify?
Do you think their customers are going to jump ship to Bigcommerce or woocommerce?
 

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What does this have to do with Facebook? There is no relationship at all. I don't see how this is an issue. Many physical businesses have switched to using Shopify. In fact I was just about to post this message when I saw this thread.

Shopify really has been offering very useful tech for small businesses. There's a local florist that I really like (I'm been a long time customer) and normally I would physically walk in, browse the selection, and order the flowers in person.

Due to covid neither I, nor do they, want me to come into the store. I already know which businesses I'm shopping at -- fraud is not a concern. I went to their web site, and it turns out it's a Shopify-driven order system.

I phoned the store and they said that they prefer that all orders go through the web site. Clearly it's a well operating machinery, highly integrated, and efficient for them. So after my conversation with the store for help about their products (as I would have done in person) I hung up, and am now preparing the order through the SHOP infrastructure.

That's basically "business as usual" for them, thanks to SHOP, and another $100 sale to a long time customer.

. . .

Earlier in the pandemic, I also used a BC store's web site since it was the only place I could find any masks. They were using SHOP under the hood and I didn't even notice until a small note in the email. This infrastructure appears to be really good and that's the key. Online shopping has existed for a long time, but look at how many small and medium sized businesses were able to get up and running using SHOP.
 

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What does this have to do with Facebook? There is no relationship at all. I don't see how this is an issue. Many physical businesses have switched to using Shopify. In fact I was just about to post this message when I saw this thread.
The OP may be referring to Facebook Marketplace which is a gong show. Shopify is not remotely close to being the same thing though I think Shopify will probably have to start? be more robust? on who uses their platform. Just like Pornhub has gotten itself unwanted attention with unverified videos, no reputable company really wants a major criminal element leveraging off their system.

Regardless, it is always 'buyer beware' no matter where one shops.
 

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The OP may be referring to Facebook Marketplace which is a gong show. Shopify is not remotely close to being the same thing though I think Shopify will probably have to start? be more robust? on who uses their platform. Just like Pornhub has gotten itself unwanted attention with unverified videos, no reputable company really wants a major criminal element leveraging off their system.

Regardless, it is always 'buyer beware' no matter where one shops.
I was indeed thinking of overall fraud on facebook (information mainly), but pornhub is probably a better comparison. As you said, no reputable company wants fraud on its network it undermines confidence in the the platform tech. Would you trust a bank who distributed counterfeit bills? Shopify needs to nip this in the bud as to not be guilty by association.
 

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Discussion Starter · #55 ·
"Just like Pornhub has gotten itself unwanted attention with unverified videos,"

...
curious.....how DOES Pornhub verify videos anyway?......🤪
 

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I was indeed thinking of overall fraud on facebook (information mainly), but pornhub is probably a better comparison. As you said, no reputable company wants fraud on its network it undermines confidence in the the platform tech. Would you trust a bank who distributed counterfeit bills? Shopify needs to nip this in the bud as to not be guilty by association.
Why?
Shopify isn't customer facing.

Do you care what OS, Webserver or Ecommerce system is in use at the stores you use?
I'd bet almost nobody cares what the behind the scenes software is, as long as the end users don't care, the customers won't care.

Honestly, which technology underlying these companies makes them suspect?
Do you think a single person said "Not buying X, because of technology Y"?



It's important that the fraud isn't' with shopify, it's with customers using their product.
That's like your drug dealer driving a Cadillac, or using an iPhone. People don't say "I don't buy Apple because drug dealers use it too"
 

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I don't get it, so what, a few fraudsters use Shopify.

Did you know that all those fraudsters also use THE INTERNET!!!

They likely use SSL, and credit cards, maybe even Canada Post?
In fact they likley use the exact same stuff everyone else does.


Do you think anyone is going to stop using Ontario Cannabis Store because of this?

So why, is this a problem for Shopify?
Do you think their customers are going to jump ship to Bigcommerce or woocommerce?
Wait till people find out how much fraud happens on Amazon!
 

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Wait till people find out how much fraud happens on Amazon!
Haha, that's why they say don't buy SD cards on Amazon, the fraud levels are insane.

But there is a big difference between buying on Amazon, and buying from a store powered by shopify.
When you buy from Amazon, you know you're buying from Amazon. Most people don't know if they're buying from shopify, that's the point behind using a shopify store, instead of
Etsy, Amazon, Bestbuy, Walmart, ebay etc.
 

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Haha, that's why they say don't buy SD cards on Amazon, the fraud levels are insane.

But there is a big difference between buying on Amazon, and buying from a store powered by shopify.
When you buy from Amazon, you know you're buying from Amazon. Most people don't know if they're buying from shopify, that's the point behind using a shopify store, instead of
Etsy, Amazon, Bestbuy, Walmart, ebay etc.
What’s the story of SD cards? I never buy them, but curious.
 

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Why?
Shopify isn't customer facing.

Do you care what OS, Webserver or Ecommerce system is in use at the stores you use?
Why yes as a matter of fact----I do. And you should too. In chain of processing events and supporting infrastructure such as A(process)->B(infrastructure)->C(process)->D(infrastructure)->E(etc) a compromise in a processing event can lead to compromise for all. It's also true that a compromise in any part of the infrastructure many lead to a compromise for all.

The western world right now is fighting UNC2452 global intrusion campaign by the russians. The russian hackers' attack vector was through the supporting mundane software (network performance software i.e. monitoring and logging.) They simply trojanized Solarwinds network performance monitor and distributed malware (sunburst, beacon, and teardrop). So one bad apple did spoil the whole basket. Although you can't prove a negative, my bet is where there is fraud, there is more fraud of all types.......


Honestly, which technology underlying these companies makes them suspect?
Do you think a single person said "Not buying X, because of technology Y"?

They don't because they don't know. Not everyone is an IT security specialist, but companies should/must be acting on behalf of the public good and applying security controls throughout their solutions.


It's important that the fraud isn't' with shopify, it's with customers using their product.
That's like your drug dealer driving a Cadillac, or using an iPhone. People don't say "I don't buy Apple because drug dealers use it too"
Are you suggesting that its okay that shopify becomes the new dark web of sales stores? Or would you rather shopify makes sure that the fraud is eliminated. If they are selling you fraudulent goods, more than likely they are stealing other things as well.
 
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