$SHOP worth the risk?

Updated: Aug 1, 2020

Its time to talk about a newer name and remarkable company. $SHOP otherwise known as Shopify.


Current Price: $1,053.590

52/Wk High: $1,107.920

52/Wk Low: $282.08


Read below for the breakdown.


$SHOP is an online platform in which provides the tools for virtually anyone to create, run, and operate an online retail business.


Shopify has been popular for years and growing with the common online growth trends, but COVID-19 has put the company into a more exponential growth position.


Just recently the company reported stellar earnings and growth statistics. Just today the company reported that Shopify saw a huge 71% increase in new stores created and a whopping 119% Q2 YOY increase in gross merchandise volume.


Furthermore, the growth the company has seen is converting into real earnings power. This is not only important to the company itself but shareholders.


Throughout the past couple weeks, many have questioned $SHOP’s current price point but in all likely hood, it’s right where it should be given their performance.


Digging into the numbers Shopify reported a massive beat. The company reported a Q2 EPS of $1.05 compared to the expected $1.04 EPS consensus. Not only that but revenue came in at $714.3 million dollars, representing a YOY increase of 97%.


Surprisingly analysts have held back on the name. Currently, the mean price target is $972.17/share. Secondly, the high is $1,300/share and low is $650.00/share. Overall, I think analysts will be forced to increase price targets after a stellar Q2.


In the case of any headwinds, Shopify has also positioned itself well when it comes to cash. The most recent reported cash and equivalents level was $650 million.


The balance sheet also looks great. When last reported the company reported a total of no debt on the company, putting Shopify in great position.


The big money is bullish on the other hand. Currently, 72.45% of shares are owned by institutions. Top holders include Baillie Gifford & Co, Capital Research Global Investors, and Capital World Investors.


On the downside, $SHOP did not release guidance given the major factor of COVID-19. While this may be a minimal downside, I believe that the company will continue to grow and prosper.


At the end of the day, online retail is the future and Shopify is a major player. If the company continues its major winning streak, I do not see why the stock should not continue either.


Other future catalysts for the company could include the potential buy out of Stamps.com as recommended by Citron Research.


In the past, Shopify has acquired companies to improve itself and the platform. For example, in late 2019 $SHOP acquired 6 River Systems for $450 million.


Finally, the stock has run 165% YTD, and waiting for an opportunity for a pullback sounds like a better plan than buying in at its current price point.


In total, if you are looking to get into an online retail play, $SHOP is the way to go and an excellent name to add to the portfolio.


EAT - SLEEP - PROFIT


Disclaimer: This is not direct financial advice, simply opinion based on independent research. Luke Donay does not currently hold an investment in $SHOP.