company background image
SHOP

Shopify NYSE:SHOP Stock Report

Last Price

US$40.76

Market Cap

US$51.7b

7D

-0.1%

1Y

-72.8%

Updated

12 Aug, 2022

Data

Company Financials +
SHOP fundamental analysis
Snowflake Score
Valuation1/6
Future Growth2/6
Past Performance0/6
Financial Health3/6
Dividends0/6

SHOP Stock Overview

Shopify Inc., a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, and Latin America.

Shopify Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Shopify
Historical stock prices
Current Share PriceUS$40.76
52 Week HighUS$176.29
52 Week LowUS$29.72
Beta1.8
1 Month Change26.78%
3 Month Change1.27%
1 Year Change-72.79%
3 Year Change13.62%
5 Year Change330.96%
Change since IPO1,487.23%

Recent News & Updates

Aug 11

Shopify Stock's Outlook: Is A Rebound Possible In The Rest Of 2022?

SHOP's Q2 2022 top line and bottom line were worse than expected, but Shopify impressed investors on certain metrics like offline GMV growth, payments' penetration rate, and subscription solutions revenue. A rebound for Shopify in the rest of 2022 is possible, as I think that SHOP's 2H 2022 financial results can beat the market's expectations. SHOP is appealing as a long-term investment candidate, considering the potential for Shopify's take rate to grow from the current low single-digit percentage levels. I deem Shopify's shares to be a Buy, as there are both short-term catalysts and long-term growth drivers for the name. Elevator Pitch I continue to rate Shopify Inc.'s (SHOP) stock as a Buy. In my previous May 31, 2022, update for SHOP, I highlighted why investors should be bullish on Shopify prior to its stock split in late-June 2022. I evaluate the prospects of a share price recovery for Shopify in the second half of this year with this latest article. There is a good possibility of a rebound in SHOP's stock price for the rest of 2022, as I am of the view that Shopify's GMV, revenue, and operating losses for the second half of the current year should surprise the market in a positive way. In the long run, I am optimistic that SHOP's take rate can rise further from the 1.98% it registered in Q2 2022. These factors provide support for my positive view and Buy rating for Shopify. SHOP Stock Key Metrics As a start, I will assess SHOP's key metrics for the most recent quarter. Shopify released the company's Q2 2022 financial results in late-July, and its headline numbers weren't as good as what the market had hoped for. Revenue growth for SHOP slowed from +57% YoY in Q2 2021 and +22% YoY in Q1 2022 to +16% YoY for Q2 2022. Furthermore, the company's actual Q2 2022 top line of $1,295 million turned out to be 3% lower than the sell-side's consensus revenue estimate of $1.33 billion. Shopify generated a non-GAAP adjusted net loss per share of -$0.03 in Q2 2022 as compared to positive non-GAAP EPS of +$0.22 for Q2 2021. Before the company reported its second-quarter results, investors had expected SHOP to deliver a positive adjusted EPS of +$0.03 in the recent quarter. Also, Shopify's Gross Merchandise Volume, or GMV, of $46.9 billion for the second quarter of 2022 came in 4% below Wall Street's consensus Q2 GMV of $48.9 billion as per S&P Capital IQ. But there were a quite a number of bright spots within Shopify's most recent quarterly financial performance that investors should pay attention to. Firstly, Shopify's offline GMV increased by a strong +47% YoY in the recent quarter as compared with an 8% YoY growth in online GMV, as disclosed at its Q2 2022 earnings briefing on July 27, 2022. In other words, SHOP's lower-than-expected overall GMV (as indicated above) for Q2 2022 is largely attributable to the fact that consumers are shifting their spend from online to offline, as the modest increase in online GMV is not fully compensated for by offline GMV's rapid growth. More importantly, SHOP also stressed at the company's second-quarter investor call that "we continue to take (market) share in both (offline and online retail)." Secondly, SHOP's penetration rate of payments (calculated as Gross Payments Volume or GPV divided by GMV) expanded by 2% QoQ and 5%YoY to 53% in Q2 2022. Going forward, payments' penetration rate for Shopify should continue to rise, as the company introduces "Shopify Payments" and "Shopify POS (Point-Of-Sales) with integrated payments" in more markets. Thirdly, subscription solutions revenue for Shopify increased by 10% YoY from $334 million in the second quarter of last year to $366 million in the most recent quarter, and this also beat the market's consensus forecast of $362 million by 1% according to S&P Capital IQ. A key driver was the increase in the take-up rate for Shopify Plus, as Shopify Plus' proportion of Monthly Recurring Revenue or MRR grew from 26% in Q2 2021 to 31% in Q2 2022. It is noteworthy that the YoY growth for SHOP's subscription solutions revenue in Q2 2022 could have been even higher. Shopify mentioned at its recent second-quarter results call that "the change in app and theme revenue share model for partners that we implemented in Q3 (2021)" had a negative impact on its subscription solutions revenue growth to the tune of approximately -400 basis points. I look at the short-term financial expectations for SHOP in the subsequent section. What Is The Prediction For Shopify Stock? In this section, I outline the expectations for Shopify's financial performance for 2H 2022 and full-year fiscal 2022 as per management guidance and the sell-side' consensus numbers. Shopify's Updated FY 2022 Management Guidance SHOP's Q2 2022 Results Presentation As indicated in the chart presented above, Shopify's management appears to be predicting that there will be a moderation in the company's revenue growth and SHOP will return to losses this year. Specifically, the management guidance relating to "GMV and total revenue to be more evenly distributed across the four quarters" implies that an acceleration in GMV and top line growth for 2H 2022 is less likely. Also, SHOP guided for "an adjusted operating loss in 2H22", and the company was already loss-making at the operating profit level for the first half of the year. Wall Street analysts' financial projections are in line with the guidance provided by SHOP's management. Based on data sourced from S&P Capital IQ, Shopify's top line expansion is estimated to slow from +57% YoY in fiscal 2021 to +19% in FY 2022, while it is expected to generate a loss of -$136 million at the EBIT level in the current fiscal year as compared to an EBIT of +$718 million for FY 2021. In the next section, I touch on Shopify's stock price outlook for the rest of the year. Will Shopify Stock Rebound In 2022? In my view, Shopify's stock will rebound for the remainder of 2022, as I see SHOP delivering a better-than-expected financial performance for the second half of this year. Shopify's shares have fallen by -70% thus far this year, which represents a significant underperformance as compared to the S&P 500's -12% correction in 2022 year-to-date. Shopify's POS network expansion and increased localization should be supportive of stronger-than-expected revenue and GMV growth in 2H 2022. SHOP's offline GMV as a proportion of total GMV increased from 8% in Q2 2021 to 10% in Q2 2022, and Shopify attributed this to the fact that "our POS Pro locations are increasing in the thousands year-over-year" in 1H 2022 at its Q2 2022 investor briefing. Looking ahead, SHOP has guided at the recent quarterly earnings call that the number of POS Pro locations will "continue to increase into the back half" of 2022. This puts Shopify in a good position to benefit from the shift in consumer spending from online to offline as the economy reopens in a post-pandemic environment. Separately, Shopify continues to put in a lot of effort in the area of localization as indicated in the chart below. This is the key reason why SHOP has noted in its FY 2022 outlook (highlighted in the preceding section) that it expects the "number of new merchants joining the platform to be higher in 2H22 compared to 1H22." Shopify's Localization Efforts SHOP's Q2 2022 Results Presentation In terms of costs and profitability, Shopify has mentioned in its fiscal 2022 outlook that the company's "operating expense growth" is expected to "decelerate in Q3 and again in Q4" of 2022. Prior to the company's recent quarterly earnings announcement, Seeking Alpha News had made reference to a Wall Street Journal article on July 26, 2022 which highlighted that SHOP "plans to cut ~1K jobs or 10% of its global workforce." In my opinion, this suggests that Shopify is trying its best to strike a good balance between profitability improvement driven by cost control and supporting future growth with new investments. As such, I think that SHOP's operating losses for 2H 2022 might turn out to be narrower than what is expected, and this could be a positive surprise.

Aug 04

Shopify Remains Insanely Overvalued

Shopify posted a $1.12 billion net loss for Q2. $1 billion of that was a non-cash write-down of the company’s equity investments. The company said that it will generate an operating loss for 2H of 2022, and it expects the Q3 operating loss to increase “materially” over the second quarter’s $190 million loss. About the only positive in SHOP’s earnings report is that it has roughly $5.50/share in cash and marketable securities. However, based on 2H guidance, the company likely will burn around 10% of the $6.65 billion in cash plus marketable securities. Giving SHOP the benefit of simply doubling the 1H revenues to come up with a full-year estimate, it is trading at 9x revenues. Shopify (SHOP) posted a $1.12 billion net loss for Q2. To be sure, $1 billion of that was a non-cash write-down of the company’s equity investments. However, once all of those companies go out of business, it will be an economic loss of the cash used to invest in them. But even adding that write-down back, SHOP lost $190 million on an operating basis vs. $139 million of operating income in Q2 2021. For the 1H of 2022, SHOP posted an operating loss of $288 million vs. $258 million in operating income in 1H 2021. The surge from the pandemic in online buying died in late 2021, and now a large portion of consumers no longer have the disposable income needed to buy the stuff sold on SHOP’s platform. SHOP’s operations burned $177 million in cash in 1H 2022 vs. providing $202 million in cash in 1H 2021. The company said that it will generate an operating loss for 2H of 2022, and it expects the Q3 operating loss to increase “materially” over the second quarter’s $190 million loss. It sounds like the operating loss in Q3 will be quite large, as management goes on to say “we expect an adjusted operating loss in the fourth quarter that is significantly smaller than in the third quarter, but larger than in the second quarter.” About the only positive in SHOP’s earnings report is that it has roughly $5.50/share in cash and marketable securities. However, based on 2H guidance, the company likely will burn around 10% of the $6.65 billion in cash plus marketable securities. Giving SHOP the benefit of simply doubling the 1H revenues to come up with a full-year estimate, it is trading at 9x revenues. We can’t gauge operating and net income valuation ratios because the company will be losing money, and the rate of loss will increase, for at least the next two quarters. Thus, on both a trailing four-quarter and six-month forward basis, SHOP loses money. To put the 9x revenues metric in perspective, AMZN trades at 2.9x sales, while most other retailers - all of which have big online businesses (Walmart (WMT), Target (TGT), etc.) - trade between 0.5x-0.8x sales trailing sales. SHOP did a 10-for-1 stock split on June 29th. Pre-split, it had run up to as high as $1700 at the frenzied top of the stock bubble. It’s back down to $340 pre-split. Post-split, the all-time high was $170. The current stock price is $34 and the 5-year low is just below $12: SHOP - 5yr Daily (Short Seller's Journal) Assuming SHOP does $6 billion in revenues in 2022, this gives the company the benefit of revenue growth in the 2H, though it will still lose $600-700 million on an operating loss basis. If SHOP breaks that line of support, which extends back to the March 2020 lows, I believe it could see $12 before year-end but for sure within the next 12 months. At a share price of $12, the price/sales ratio using my 2022 estimated full-year revenues is still 2.5x. This would correct SHOP’s valuation down to Amazon's (AMZN) level. But unlike AMZN, SHOP loses a lot of money. If it corrects down to the average P/S ratio for big retailers with online operations, the stock price will fall to $3/share (this is based on a PSR of 0.65 and $6 billion in revenues). By the time SHOP might fall to $3, its cash hoard - at $5.50/share now - will be well below $5/share. Maybe the cash on hand will prevent it from falling to $3 for a couple years.

Shareholder Returns

SHOPUS ITUS Market
7D-0.1%1.2%3.2%
1Y-72.8%-26.5%-10.1%

Return vs Industry: SHOP underperformed the US IT industry which returned -27.3% over the past year.

Return vs Market: SHOP underperformed the US Market which returned -11.7% over the past year.

Price Volatility

Is SHOP's price volatile compared to industry and market?
SHOP volatility
SHOP Average Weekly Movement14.3%
IT Industry Average Movement9.2%
Market Average Movement7.7%
10% most volatile stocks in US Market16.9%
10% least volatile stocks in US Market3.2%

Stable Share Price: SHOP is more volatile than 75% of US stocks over the past 3 months, typically moving +/- 14% a week.

Volatility Over Time: SHOP's weekly volatility (14%) has been stable over the past year, but is still higher than 75% of US stocks.

About the Company

FoundedEmployeesCEOWebsite
200410,000Tobi Lütkehttps://www.shopify.com

Shopify Inc., a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. The company’s platform enables merchants to displays, manages, markets, and sells its products through various sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces; and enables to manage products and inventory, process orders and payments, fulfill and ship orders, new buyers and build customer relationships, source products, leverage analytics and reporting, manage cash, payments and transactions, and access financing. It also sells custom themes and apps, and registration of domain names; and merchant solutions, which include accepting payments, shipping and fulfillment, and securing working capital.

Shopify Fundamentals Summary

How do Shopify's earnings and revenue compare to its market cap?
SHOP fundamental statistics
Market CapUS$51.70b
Earnings (TTM)-US$1.90b
Revenue (TTM)US$5.00b

10.3x

P/S Ratio

-27.2x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
SHOP income statement (TTM)
RevenueUS$5.00b
Cost of RevenueUS$2.41b
Gross ProfitUS$2.59b
Other ExpensesUS$4.50b
Earnings-US$1.90b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)-1.50
Gross Margin51.87%
Net Profit Margin-38.01%
Debt/Equity Ratio10.5%

How did SHOP perform over the long term?

See historical performance and comparison
We’ve recently updated our valuation analysis.

Valuation

Is SHOP undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

1/6

Valuation Score 1/6

  • Price-To-Sales vs Peers

  • Price-To-Sales vs Industry

  • Price-To-Sales vs Fair Ratio

  • Below Fair Value

  • Significantly Below Fair Value

  • Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for SHOP?

Other financial metrics that can be useful for relative valuation.

SHOP key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue9.2x
Enterprise Value/EBITDA-314.3x
PEG Ration/a

Price to Sales Ratio vs Peers

How does SHOP's PS Ratio compare to its peers?

SHOP PS Ratio vs Peers
The above table shows the PS ratio for SHOP vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPSEstimated GrowthMarket Cap
Peer Average4.7x
GDDY GoDaddy
3.2x8.8%US$12.7b
BIGC BigCommerce Holdings
5.9x16.7%US$1.5b
WIX Wix.com
3.3x13.1%US$4.4b
ETSY Etsy
6.3x13.8%US$15.2b
SHOP Shopify
10.3x23.8%US$51.7b

Price-To-Sales vs Peers: SHOP is expensive based on its Price-To-Sales Ratio (10.3x) compared to the peer average (4.7x).


Price to Earnings Ratio vs Industry

How does SHOP's PE Ratio compare vs other companies in the US IT Industry?

Price-To-Sales vs Industry: SHOP is expensive based on its Price-To-Sales Ratio (10.3x) compared to the US IT industry average (3x)


Price to Sales Ratio vs Fair Ratio

What is SHOP's PS Ratio compared to its Fair PS Ratio? This is the expected PS Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

SHOP PS Ratio vs Fair Ratio.
Fair Ratio
Current PS Ratio10.3x
Fair PS Ratio12.4x

Price-To-Sales vs Fair Ratio: SHOP is good value based on its Price-To-Sales Ratio (10.3x) compared to the estimated Fair Price-To-Sales Ratio (12.4x).


Share Price vs Fair Value

What is the Fair Price of SHOP when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: SHOP ($40.76) is trading above our estimate of fair value ($0.38)

Significantly Below Fair Value: SHOP is trading above our estimate of fair value.


Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.


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Future Growth

How is Shopify forecast to perform in the next 1 to 3 years based on estimates from 44 analysts?

Future Growth Score

2/6

Future Growth Score 2/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


69.3%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: SHOP is forecast to remain unprofitable over the next 3 years.

Earnings vs Market: SHOP is forecast to remain unprofitable over the next 3 years.

High Growth Earnings: SHOP is forecast to remain unprofitable over the next 3 years.

Revenue vs Market: SHOP's revenue (23.8% per year) is forecast to grow faster than the US market (7.9% per year).

High Growth Revenue: SHOP's revenue (23.8% per year) is forecast to grow faster than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: SHOP's Return on Equity is forecast to be low in 3 years time (6.1%).


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Past Performance

How has Shopify performed over the past 5 years?

Past Performance Score

0/6

Past Performance Score 0/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


44.7%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: SHOP is currently unprofitable.

Growing Profit Margin: SHOP is currently unprofitable.


Past Earnings Growth Analysis

Earnings Trend: SHOP is unprofitable, but has reduced losses over the past 5 years at a rate of 44.7% per year.

Accelerating Growth: Unable to compare SHOP's earnings growth over the past year to its 5-year average as it is currently unprofitable

Earnings vs Industry: SHOP is unprofitable, making it difficult to compare its past year earnings growth to the IT industry (20.7%).


Return on Equity

High ROE: SHOP has a negative Return on Equity (-21.81%), as it is currently unprofitable.


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Financial Health

How is Shopify's financial position?

Financial Health Score

3/6

Financial Health Score 3/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Debt Coverage

  • Interest Coverage

Financial Position Analysis

Short Term Liabilities: SHOP's short term assets ($7.9B) exceed its short term liabilities ($703.2M).

Long Term Liabilities: SHOP's short term assets ($7.9B) exceed its long term liabilities ($1.3B).


Debt to Equity History and Analysis

Debt Level: SHOP has more cash than its total debt.

Reducing Debt: Insufficient data to determine if SHOP's debt to equity ratio has reduced over the past 5 years.

Debt Coverage: SHOP's debt is not well covered by operating cash flow (13.7%).

Interest Coverage: Insufficient data to determine if SHOP's interest payments on its debt are well covered by EBIT.


Balance Sheet


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Dividend

What is Shopify current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage

Dividend Yield vs Market

Notable Dividend: Unable to evaluate SHOP's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate SHOP's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.


Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if SHOP's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if SHOP's dividend payments have been increasing.


Earnings Payout to Shareholders

Earnings Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.


Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as SHOP has not reported any payouts.


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Management

How experienced are the management team and are they aligned to shareholders interests?

1.8yrs

Average management tenure


CEO

Tobi Lütke (41 yo)

17.92yrs

Tenure

US$20,000,458

Compensation

Mr. Tobias Lütke, also known as Tobi, Co-founded Shopify Inc. in September 2004 and serves as its Chairman. He serves as Director at Coinbase, Inc. since 2022. Mr. Lütke has been the Chief Executive Office...


CEO Compensation Analysis

Compensation vs Market: Tobi's total compensation ($USD20.00M) is above average for companies of similar size in the US market ($USD12.88M).

Compensation vs Earnings: Tobi's compensation has increased whilst the company is unprofitable.


Leadership Team

Experienced Management: SHOP's management team is not considered experienced ( 1.8 years average tenure), which suggests a new team.


Board Members

Experienced Board: SHOP's board of directors are considered experienced (7.7 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Company Information

Shopify Inc.'s employee growth, exchange listings and data sources


Key Information

  • Name: Shopify Inc.
  • Ticker: SHOP
  • Exchange: NYSE
  • Founded: 2004
  • Industry: Internet Services and Infrastructure
  • Sector: Software
  • Implied Market Cap: US$51.699b
  • Shares outstanding: 1.27b
  • Website: https://www.shopify.com

Number of Employees


Location

  • Shopify Inc.
  • 151 O'Connor Street
  • Ground floor
  • Ottawa
  • Ontario
  • K2P 2L8
  • Canada

Listings


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/08/12 00:00
End of Day Share Price2022/08/12 00:00
Earnings2022/06/30
Annual Earnings2021/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.