Canadian Money Forum banner
81 - 94 of 94 Posts

·
Registered
Joined
·
21,098 Posts
I'm still not convinced on SHOP, but it's also tough to differentiate a 'bubble stock' from a company which really is rising to greatness. The market tends to happily give fast-growing companies a high multiple.

I decided to get my exposure using XIT
 

·
Registered
Joined
·
7,932 Posts
I'm still not convinced on SHOP, but it's also tough to differentiate a 'bubble stock' from a company which really is rising to greatness. The market tends to happily give fast-growing companies a high multiple.

I decided to get my exposure using XIT
I'd try to explain a valuation case, and if it doens't add up. I don't buy.

This had me late on google, amazon, and apple.
But I also missed out on innumerable dogs.

For Shopify, how much of the market can they capture, and what is the revenue of their potential market.
How many accounts at $x/year will they have. That is your top end cap.
If you can't make a valuation work, then skip it.
 

·
Registered
Joined
·
1,792 Posts
Every time a stock has surpassed Royal Bank's market cap on the TSX, it has retreated or outright crashed. Nortel, Blackberry, Valeant.
Will SHOP be the same story? I haven't a clue. I'm neutral on it and wouldn't take a position. They have a legitimate business capitalizing on real trends, but valuation of the stock leaves little room for any sort of setback.
 

·
Registered
Joined
·
1,678 Posts
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.
4 months ago I was waiting for $950 and as time passed by, I actualized my target to $1050. If I actualize my target again to account those 4 months that have passed, my target would be $1200. Maybe I'll finally be able to buy.
 

·
Registered
Joined
·
3,130 Posts
Shopify, down 30% from its all time high in February and now with a $164B market cap, has fallen behind Royal Bank, at $167B, as the most valuable company in Canada. RY just closed at a new all time high.

The difference in valuation is of course striking, with Shopify at something like 40 times price to sales and a P/E of 400+. Royal Bank has a trailing P/E of 14, and on a more normalized basis is about P/E of 11 and forward P/E of just over 10. It's not even that expensive on fundamental metrics and that doesn't account for potential for an increasing interest yield curve.

I know comparisons are hard, and Shopify is growing fast, but Royal Bank has more 300% more net income than Shopify has revenue.
 

·
Registered
Joined
·
519 Posts
I'm not going to comment on the stock, but from a technological point of view. Shopify is a joke compared to a "real" eCommerce platform like Magento 2 or even WooCommerce.

Shopify is great for mom-n-pop operations that want to sell T-shirts from their basement.
Yes, they do boast some big brand users like Heinz. But these are only for direct-to-consumer. Who buys ketchup online?

No real enterprise-grade B2B organization would ever give Shopify a second glance.

I was involved in a monolithic, multi-million dollar web project. When discussing platform options Shopify came up. The discussion lasted all of 2 minutes. We went with Magento 2 Open Source that we customized to the gills.
 

·
Registered
Joined
·
21,098 Posts
I was involved in a monolithic, multi-million dollar web project. When discussing platform options Shopify came up. The discussion lasted all of 2 minutes. We went with Magento 2 Open Source that we customized to the gills.
I'm not trying to defend SHOP's valuation here, but what you wrote here is describing the story of what makes Shopify attractive.

Yes, people who run all their own servers and like working on the guts of systems will DIY and customize everything. I understand that, but this is not the way most businesses do things. In fact, it's becoming increasingly rare to find a business that even runs their own server infrastructure! Even their own web sites.

People like to have prepackaged, hosted, ready-to-go things. I know this first hand because I provide various technical/IT services and tools, meant for self-hosted businesses and people running their own servers. It resonates with Linux people and tech gurus. But increasingly I am finding it's hard to find these kinds of people. I've also been doing market research and new product development, again targeting the "running our own servers" crowd, and this segment is rapidly disappearing.

It's really quite impressive to see how many businesses transitioned to Shopify's platform during covid. I'm not a big shopper or anything, but I have seen Shopify popping up everywhere among stores I shop at. There has clearly been a massive adoption of this platform at least in Canada.

And I think it's because Shopify has offered attractive capabilities, and sufficient customization, in an easy to use package. It has benefited from word of mouth. Don't underestimate the value of "easy".

Whether that's sustainable and justifies the valuation is a totally different matter, I realize.
 

·
Registered
Joined
·
5,117 Posts
I'm afraid Shop's success could mirror Blackberry with things like Origin Protocol already making it look old and dusty

Centralized intermediaries are made redundant as server infrastructure is decentralized to many nodes earning small fees

Shop is already being investigated for privacy leaks. This is a problem with all centralized intermediaries exploiting data
 

·
Registered
Joined
·
1,411 Posts
There are cheaper tech companies out there with better yield. Sangoma Technologies (P/S 3.4) and Converge Technologies services(1.1) are two w decent sales growth of ~40%. Their GP growth yield is 6%+ where SHOP is ~ 1%.

SHOP is larger and a little more established though but even they admit sales growth will be slowing from 80%/yr.
 

·
Registered
Joined
·
222 Posts
FWIW if I was looking to value it I would hone in on customer lifetime value. In particular switching cost and fees/profitability. Also the sensitivity of SHOP revenue to transactional versus monthly subscription is a factor to consider. There is no question they have built a terrific business helping organizations rapidly and easily augment their current set-up with eCommerce sales. Looking ahead it really comes down to how profitable each marginal customer is, and whether these customers stick around or flip to a cheaper solution (in house or other service provider). Or for some, just go back to selling in their physical store/bakery/etc and fall back to a basic website +FB or GOOGL for discovery.
 

·
Registered
Joined
·
21,098 Posts
Part of the SHOP story is a bet on an Amazon takeover.

Amazon is an unstoppable monopoly which drives every competitor out of business or destroys them through acquisition. Since Shopify has grown to the point that it's not a tiny player that can just be bullied out, this puts acquisition on the table.

In a way, SHOP is a bet on the Amazon monopoly continuing on its rampage. And if Amazon was busted up by the US government (which I believe should happen) then SHOP would fall.
 
81 - 94 of 94 Posts
Top