$SHOP Stock Update for 2020-10-14

Financial:

  • Market return: 19% Month, 15% Quarter, 123% Half year, 221% Year
  • EPClub ARR: up 8% in 2 months
  • Recommend: 2.5
  • PEG: n/a
  • EPS next 5Y: n/a

 

Summary:

  • Shopify is an all-in-one eCommerce platform
  • Stock has soared lately
  • Hold or buy more

 

Notes:

  • Exponential surge in buying of essential items due to COVID-19 led lockdowns and shelter-in-place guidelines are driving growth. Moreover, robust performance of Shopify Shipping, Shopify Payments and Shopify Capital are key catalysts. Furthermore, solid uptake of new merchant-friendly applications amid evolving retail environments bodes well.
  • Additionally, partnerships with Walmart and Facebook are expected to expand their merchant base. Initiatives aimed at international expansion are noteworthy. However, higher investments on product development and fulfillment platforms are likely to limit margin expansion in the near term.
  • Shopify’s (SHOP) – Get Report Fulfillment Network is “a full-fledged, tightly integrated fulfillment solution,” according to a KeyBanc Capital Markets analyst.
  • The Shopify Fulfillment Network, which was launched last year, “is a full-fledged, tightly integrated fulfillment solution for Shopify merchants and includes order/inventory management solutions, branding and data controls, and access to scalable, flexible warehousing space to sell across multiple channels.”
  • A broad array of robotic systems has been developed to automate and optimize fulfillment across of variety of functions, such as picking, moving, and sorting, leveraging both hybrid human/robot and purely robotic operations.
  • The pandemic “has accelerated adoption across the e-commerce landscape, though for Shopify the path to durable, sustained growth comes from more than just exposure to temporal impacts,” Weiss wrote.
  • SHOP continues to innovate rapidly in solving key issues for merchants.
  • To this end, Merwin believes merchant solutions will continue to grow as a percentage of Shopify’s total revenue. It should also be noted that the SMB segment currently accounts for the vast majority of merchants, which is also expected to continue.

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