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SHOP - Deep Dive (up 2500%)

We recommended Shopify Inc. (SHOP) on 8/24/2016 at just $41. We were quick to spot a potential e-commerce rising star, and how right were we! Today, we are sitting on a neat profit of over 2500%, with the stock nearing the $1100 mark. Another terrific outcome of our persistent research and forward looking ability. Congratulations! So what is next for SHOP after such a terrific run?

Blowout Quarter

  • EPS - $1.05 beats by $1.03.

  • Revenue - $714.34 million beats by $202.78 million, up 96% YoY.

  • Gross merchandise volume (GMV) $30.1 billion. Beats by $10.2 billion (Spike of 119% YoY)

  • Subscription revenue up to $196.4 million vs. consensus of $192 million.

What's Next?

  • People are clearly spending more time indoors, than outdoor due to the pandemic constraints. Online spending is at its peak.

  • This has pushed many businesses to expand (and in some cases even start) their online services and that is where SHOP comes into play.

  • The company helps businesses of all sizes set up their online shops for e-commerce sales.

  • The company also offers many additional services that help businesses manage their shipments, inventory, advertising and online payments.

  • In short, many businesses will rely on SHOP to help adapt to this new landscape due to the pandemic.

  • Enterprises are undergoing a "digital transformation" and SHOP is a key enabler for them!

Our Stance?

  • SHOP has had an extraordinary run that sets the stock price at a high valuation.

  • SHOP also faces stiff competition from heavy weights like Amazon, Walmart and Ebay

  • However, we believe SHOP is uniquely positioned to continue growing over the next 5 years.

  • We maintain HOLD on SHOP and will be on the lookout to open another position if we see a sharp pullback.


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