Where Will Shopify Stock Be In Five Years?

seekingalpha2021-05-17

Summary SHOP grew revenues by 110% in this latest quarter - yet another stunning performance. SHOP has established itself as the clear number 2 to AMZN - but will that remain so moving forward? I ...

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精彩评论

c96c13d
2021-05-18
c96c13d
Stock price too high
Anderr
2021-05-18
Anderr
Sky is the limit
RXX
2021-05-18
RXX
Not sure
MOON88
2021-05-18
MOON88
Missed this one
- hydros:
  same
Shadowrider
2021-05-18
Shadowrider
Please comment
- 牛气冲天73:
  ok
Stephen_Ong
2021-05-18
Stephen_Ong
Wow

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Because SHOP enables its customers to achieve a direct to consumer e-commerce presence, the company appears to be an anti-Amazon secular growth story. SHOP achieved strong growth in its latest quarter, and is expected to grow rapidly this year as well. Even assuming aggressive assumptions regarding forward growth and profit margins, it appears that the stock is already pricing in many years of growth. Those expecting outperformance may be disappointed, unless SHOP is able to grow even faster and make even more money than expected.\nShopify Stock Price\nSHOP has not proven immune to the recent selloff in growth stocks - likely because it is perceived to be a “lockdown play” amidst a rapidly improving vaccination landscape. SHOP trades just under $1,100 per share - with over 35% upside to all time highs.\n(Seeking Alpha)\nShopify Earnings\nSHOP’s latest quarterly earnings showed strong top-line growth, with revenues soaring 110% year over year (‘YOY’).\n(2020 Q1 Presentation)\nClearly, SHOP benefited from easy comparables, as 2020 Q1 was the last quarter before the pandemic hit. However, in addition to benefiting from the growth in e-commerce spend in general, SHOP also added a significant number of merchants to its platform, which is evidenced by the 71% growth in subscription solutions revenue.\n(2020 Q1 Presentation)\nI am most excited by the increasing user base of Shop Pay, which I view to be SHOP’s answer to PayPal (PYPL). In my discussion below, I believe Shop Pay to be SHOP's greatest long term growth catalyst.\n(2020 Q1 Presentation)\nSHOP continued to drive operating leverage, with non-GAAP operating expenses declining to 36% of revenues.\n(2020 Q1 Presentation)\nThis showed in the boost in net income. GAAP net income was $1.3 billion, but this included $1.3 billion in unrealized investment gains. The improvement in operating leverage is better seen in analyzing operating income, which jumped from a net loss of $73.2 million last year to positive $118.9 million this year.\nShopify Stock Forecast\nLooking forward, Wall Street expects SHOP to continue growing rapidly. Consensus estimates call for SHOP to report strong revenue growth moving forward, but real operating leverage to take place only starting in 2023.\n(Seeking Alpha)\nWill SHOP be able to meet these lofty expectations?\nWhere Will Shopify Stock Be In Five Years\nI see two main long term growth stories for SHOP. The first involves the company taking a greater share of the e-commerce landscape. Currently, SHOP owns only 8.6% of total U.S. ecommerce sales, far less than the 39% from Amazon (AMZN).\n(2020 Q1 Presentation)\nSHOP has outlined its goals as stated below, with its near term focuses being on things like Shop Pay, and ultra-long term ambitions being on fulfillment.\n(2020 Q1 Presentation)\nI am conflicted on its long-term fulfillment ambitions, as that would likely be capital intensive and may also impact margins for many years (just look at AMZN). However, SHOP may find the ability to offer subsidized shipping to be a necessary poison in order to take market share from AMZN.\nI see SHOP as empowering small businesses to build their own ecommerce presence online. For this reason, SHOP can be considered a sort of \"Anti-Amazon\" catalyst. Yet will AMZN compete with SHOP in this area, considering their recent acquisition of competitor Selz? The answer to this question isn't exclusive to AMZN alone.\nI am most optimistic about Shopify Payments. This is an integration with Stripe which enables stores on Shopify to accept payment similar to that of PayPal (PYPL) - customers can use their Shopify account with saved credit card information to complete their purchase. Because Stripe is the underlying technology behind this integration, I do not expect SHOP to benefit directly from this relationship, however Shopify Payments may help to increase its ability to attract new merchant to its platform. Further, SHOP may be able to increase its take rate for purchases made using Shopify Payments in the future. For these reasons, I expect SHOP to grow significantly faster than the overall growth rate of e-commerce, as it is expanding rapidly within e-commerce itself.\nBut most importantly, this ability to save credit card information across Shopify stores is very important as it may help counteract AMZN's advantage of being a one-stop shop. This brings us to the most important differentiator: cost advantage. Between credit card and transaction fees, SHOP charges its shops about 3% every transaction. This is far lower than the approximate 15% being charged on AMZN. The difference is large enough to provide SHOP certain competitive advantages that should persist even if AMZN tries to enter the same space. Summing up, SHOP's excellent e-commerce builder offering plus its payment processing and cost advantages should enable it to continue aggressively taking market share in the e-commerce segment - I expect it to own a far greater chunk of total e-commerce sales in 5 years.\nAs for the stock, if it can achieve consensus estimates, then in 5 years I expect the stock to reach a stock price between $1,550 per share, representing 24x 2025 gross profits, and $1,100, representing 15x 2025 gross profits. That suggests upside of 0% to 40% over the next 5 years.\nIs SHOP A Buy Or Sell Now\nBecause SHOP has not yet maximized its profit margins, one should not value the stock on the basis of present earnings. Instead, one might prefer to use gross profits, as gross margins are also low at 56.5%. SHOP trades at 75x trailing gross profits. Because fulfillment costs are primarily present in the \"cost of merchant revenues,\" this means that gross profit is essentially the amount after fulfillment costs. As a result, it is reasonable to assume that SHOP will be able to achieve high margins on the basis of gross profits - likely higher than even the best technology companies. If we assume that SHOP can achieve 50% net margins based on gross profits, and we assume that SHOP trades at 30x earnings upon maturity, then that would imply a 15x gross profit multiple. Thus, to determine whether or not SHOP is undervalued, we must determine how quickly SHOP can grow gross profits such that its stock price falls below 15x gross profits. Assuming neutral gross margins expansion, SHOP would need to grow its top-line by 400% before achieving the above goal. We can see consensus estimates for top-line growth below.\n(Seeking Alpha)\nAnalysts expect 400% top-line growth to occur by 2024, with continued strong growth thereafter. To price in so many years of growth already may mean that forward stock returns may prove muted. In order to outperform, SHOP would need to either deliver stronger than expected growth or achieve higher net margins than the 50% predicted above. For my personal taste, these all are aggressive assumptions that I am not prepared to take. I would find shares attractive at 50x gross profits or less, but I might not be fortunate enough to see such prices. I reiterate my neutral rating on Shopify stock.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":195221451,"gmtCreate":1621298207973,"gmtModify":1634192703780,"author":{"id":"3578223609630330","authorId":"3578223609630330","name":"c96c13d","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3578223609630330","authorIdStr":"3578223609630330"},"htmlText":"Stock price too high","listText":"Stock price too high","text":"Stock price too high","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/195221451","repostId":1167574964,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":195218762,"gmtCreate":1621296872456,"gmtModify":1634192727293,"author":{"id":"3562994592859110","authorId":"3562994592859110","name":"Anderr","avatar":"https://static.tigerbbs.com/bbaa4e462675ce2d44237507252bf691","vip":1,"crmLevel":8,"crmLevelSwitch":0,"idStr":"3562994592859110","authorIdStr":"3562994592859110"},"htmlText":"Sky is the limit","listText":"Sky is the limit","text":"Sky is the limit","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/195218762","repostId":1167574964,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":195231851,"gmtCreate":1621296320073,"gmtModify":1634192736818,"author":{"id":"3581914245836452","authorId":"3581914245836452","name":"RXX","avatar":"https://static.tigerbbs.com/f4b5a03d25bea5fa50ec0dd0a11e9e39","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3581914245836452","authorIdStr":"3581914245836452"},"htmlText":"Not sure&nbsp;","listText":"Not sure&nbsp;","text":"Not 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one","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":1,"repostSize":0,"link":"https://laohu8.com/post/195203922","repostId":1167574964,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4359935,"gmtCreate":1621296169060,"gmtModify":1635407052326,"authorId":3570969181408297,"author":{"id":3570969181408297,"idStr":"3570969181408297","authorId":3570969181408297,"name":"hydros","avatar":"https://static.tigerbbs.com/999af31c7ffcd1eea8c03e9a51f02a24","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":195203922,"type":1,"supId":0,"prevId":0,"content":"<u>same</u>","text":"<u>same</u>","html":"<u>same</u>"}],"langContent":"EN"},{"id":195676891,"gmtCreate":1621295083813,"gmtModify":1634192762102,"author":{"id":"3582060513966213","authorId":"3582060513966213","name":"Shadowrider","avatar":"https://static.tigerbbs.com/5a097dc665f46a3e5b535d2fd63e682b","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3582060513966213","authorIdStr":"3582060513966213"},"htmlText":"Please 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