With just one subscription to Beyond the Wall Investing , you can save thousands of dollars a year on equity research reports from banks. You'll keep your finger on the pulse and have access to the latest and highest-quality analysis of this type of information.I first wrote about Shopify Inc. (NYSE: SHOP ) in late April 2024 with a "Hold" rating, warning investors to avoid buying the dip at the time, as the firm's slowing top-line growth seemed like a major problem to me back then. AndHe leads the investin ...

Group 1 - Shopify's recent trading session ended at $116.59, reflecting a -0.73% change from the previous day's closing price, which is a lag compared to the S&P 500's daily loss of 0.47% [1] - Over the past month, Shopify's shares have gained 10.46%, while the Computer and Technology sector has lost 0.19% and the S&P 500 has gained 1.67% [1] Group 2 - Shopify's upcoming earnings report is expected on February 11, 2025, with a predicted EPS of $0.44, indicating a 29.41% growth compared to the same quarter last year [2] - The Zacks Consensus Estimate for revenue projects net sales of $2.72 billion, up 27.02% from the year-ago period [2] Group 3 - Recent changes to analyst estimates for Shopify reflect evolving short-term business trends, with positive revisions indicating analyst optimism regarding the company's business and profitability [3] - The Zacks Rank system, which incorporates estimate changes, has shown that 1 ranked stocks yield an average annual return of +25% since 1988 [4][5] Group 4 - Shopify's current Forward P/E ratio is 77.97, significantly higher than the industry average of 23.85, suggesting that Shopify is trading at a premium [6] - The company has a PEG ratio of 1.83, compared to the Internet - Services industry's average PEG ratio of 1.75 [7] Group 5 - The Internet - Services industry, which includes Shopify, holds a Zacks Industry Rank of 76, placing it in the top 31% of all 250+ industries [7][8] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

Core Viewpoint - Shopify has demonstrated significant growth and resilience in the e-commerce sector, but investors need to carefully consider the stock's valuation before making a purchase decision for 2025 [2][12]. Group 1: Company Performance - Shopify has returned to growth mode after facing challenges post-pandemic, with revenue increasing by 26% in 2023 and maintaining strong performance into 2024 [6]. - In Q3 2024, Shopify's revenue rose 26% to $2.2 billion, and operating income more than doubled from $122 million to $283 million [6]. - The company enabled $70 billion in gross merchandise value (GMV) sales in Q3 2024, translating to an annualized rate of $280 billion [11]. Group 2: Growth Opportunities - Shopify has expanded its focus from online sales to omnichannel sales, allowing merchants to sell globally through various platforms [8]. - The company is investing in global business growth, providing local merchants with tools for international sales, including shipping, payments, and tax management [9]. - Shopify's globalization strategy includes introducing its POS system to international markets, enhancing payment processing for merchants [10]. Group 3: Market Position and Valuation - Despite Shopify's strong performance, its price-to-sales (P/S) ratio is 16 and price-to-earnings (P/E) ratio is 97, indicating that the stock may be overvalued compared to competitors like Amazon [13]. - Shopify's market share in the estimated global retail market size of $31 trillion is less than 1%, suggesting significant growth potential [11]. - The current high valuation may deter conservative investors, as the stock price can be volatile in the short term [15].

Core Insights - Shopify has recently laid off employees in its Support division, with estimates suggesting at least a dozen job losses [1][2][5] - The layoffs are part of ongoing changes within the Support division, which has faced challenges in customer service quality and management turnover [3][4][7] Group 1: Layoff Details - The layoffs occurred during or immediately after a brief meeting with HR, complicating the ability of affected employees to determine the total number of job losses [2] - Shopify has conducted multiple rounds of layoffs since 2022, including a significant reduction of 10% of its workforce in July 2022 and an additional 20% in May 2023 [5] Group 2: Support Division Changes - The Support division has been undergoing a project called "Code Yellow" aimed at improving customer service levels, which had reportedly deteriorated [3] - The company has started using generative AI to enhance efficiency and improve the merchant experience, indicating a shift in operational strategy [3] - Shopify has also been hiring third-party vendors for customer support, which has led to concerns about the overall quality of service [4] Group 3: Management Turnover - The Support division has experienced significant turnover in its management, with notable departures in 2024 [4]

Group 1: E-commerce Industry - The e-commerce market has significant growth potential, with only 16.2% of total U.S. retail transactions occurring online as of the third quarter [2] - Shopify is a key player in this space, providing tools for merchants to create and manage online storefronts, along with services like payment processing and inventory management [3][4] - Shopify's revenue grew by 26% year over year to $2.2 billion in the third quarter, with free cash flow increasing by 52.5% to $421 million, resulting in a free-cash-flow margin of 19% [5] Group 2: Shopify's Competitive Position - Shopify controls about 10% of the e-commerce market by gross merchandise volume and has improved its margins and free cash flow by reducing expenses [4][5] - The company benefits from competitive advantages such as high switching costs and a network effect from its app store, positioning it well for long-term growth [5] Group 3: Cloud Computing Industry - Veeva Systems specializes in cloud solutions for life sciences companies, addressing their unique regulatory and operational needs [6][7] - The company has established a strong client base among large life science corporations, benefiting from high switching costs that make it difficult for clients to change providers [9] Group 4: Veeva Systems' Market Potential - Veeva Systems has a total addressable market estimated at $20 billion, with trailing-12-month revenue of $2.7 billion, indicating significant growth potential as it captures a larger market share [9][10] - The company is expected to increase its revenues meaningfully over the next five years, potentially capturing around 30% of its market [11]

Group 1 - Shopify's stock closed at $106.37, reflecting a slight increase of +0.08% from the previous trading day, underperforming compared to the S&P 500 which gained 0.61% [1] - Over the past month, Shopify's shares have decreased by 3.54%, while the Computer and Technology sector and the S&P 500 have increased by 1.24% and 2.08% respectively [1] Group 2 - Shopify is expected to report earnings on February 11, 2025, with an estimated EPS of $0.44, representing a 29.41% increase from the prior-year quarter, and projected revenue of $2.72 billion, up 27.02% from the prior-year quarter [2] - Recent changes to analyst estimates for Shopify indicate a positive outlook, suggesting optimism regarding the company's business and profitability [3] Group 3 - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), has shown that 1 stocks have returned an average of +25% annually since 1988, with Shopify currently holding a Zacks Rank of 3 (Hold) [5] - Shopify's Forward P/E ratio is 70.56, indicating a premium compared to the industry's average Forward P/E of 22.69 [5] Group 4 - The PEG ratio for Shopify is currently 1.66, which is slightly above the Internet - Services industry's average PEG ratio of 1.6 [6] - The Internet - Services industry, part of the Computer and Technology sector, ranks in the top 30% of all industries according to the Zacks Industry Rank [6][7]

Market Overview - Recent market fluctuations have been driven by concerns over inflation and the potential impact of the incoming Trump administration's tariff policies on consumer spending [1] Company Focus: Shopify - Shopify is highlighted as an e-commerce software platform that is navigating the current market challenges [1] - The company has been covered by analysts with extensive experience in technology sectors, indicating a strong understanding of industry trends [1] Analyst Insights - The analyst has a long position in Shopify shares, suggesting confidence in the company's future performance [2] - The article reflects the analyst's personal opinions and is not influenced by external compensation [2]

Core Viewpoint - Shopify has emerged as a leading U.S.-based e-commerce stock, significantly rising nearly 300% from its bear market lows in 2022, yet still trading at over a 40% discount from its all-time high in 2021 [1][8] Company Overview - Shopify has successfully created an ecosystem of services for online merchants, with 72% of its revenue in the first nine months of 2024 coming from merchant services [4] - The company faced challenges with the Shopify Fulfillment Network (SFN), which led to significant fixed costs and a return to losses, prompting the sale of SFN to Flexport while retaining the brand [5][6] Financial Performance - In the first nine months of 2024, Shopify generated $6.1 billion in revenue, reflecting a 23% increase year-over-year, although this growth rate is slower compared to the 47% growth seen in the same period of 2019 [8] - Shopify reported a profit of $726 million in the first three quarters of 2024, a significant turnaround from a $525 million loss in the same period the previous year [9] Industry Outlook - The e-commerce industry is projected to grow at a compound annual growth rate (CAGR) of 19% through 2030, which is expected to positively impact Shopify's revenue and stock performance [7] Valuation Metrics - Shopify's current P/E ratio stands at 97, with a price-to-sales (P/S) ratio of 16 times revenue, indicating a mixed valuation picture [10] - Historical context shows that Amazon had higher P/E ratios during its growth phase, suggesting Shopify could sustain its earnings multiple, with its sales multiple still below pandemic highs [11] Investment Recommendation - Under current conditions, Shopify stock is recommended as a buy, with a suggestion for new buyers to consider a dollar-cost averaging approach due to rising valuations and slowing growth [13] - The ongoing growth of the e-commerce industry is expected to support Shopify's recovery and potential return to record highs [14]

Shopify's Stock Performance - Shopify's stock has increased nearly 4x since its October 2022 lows, making it one of the most successful recovery stories following the 2022 stock market selloff [1] Investment Strategy - The investment strategy focuses on companies with perfect qualitative attributes, buying them at attractive prices based on fundamentals, and holding them forever [2] - The portfolio is concentrated to avoid losers and maximize exposure to big winners, often rating great companies as 'Hold' if their growth opportunity is below the threshold or downside risk is too high [2] Analyst Background - The analyst is an MBA graduate with an L L B in law and works as a financial analyst at a large pension fund [2] - The analyst aims to publish articles covering such companies approximately 3 times per week, with extensive quarterly follow-ups and constant updates [2] Analyst's Position - The analyst has a beneficial long position in Shopify shares through stock ownership, options, or other derivatives [3]

Core Insights - Shopify's stock gained 37% in 2024, driven by robust growth and improving profitability amid a growing e-commerce market and moderating inflation [1] Company Overview - Shopify serves as the infrastructure for millions of e-commerce retailers, primarily targeting small and medium-sized businesses while also attracting larger clients through various packages and services [2] Recent Performance - The company experienced a 26% year-over-year revenue increase in the third quarter, exceeding expectations, with operating income more than doubling to $283 million [4] - Shopify has consistently expanded its free-cash-flow margin each quarter this year, with management forecasting similar performance for the fourth quarter [4] Growth Opportunities - Shopify is focusing on international expansion, where it ranks as the fourth-largest e-commerce sales platform, with international gross merchandise volume (GMV) increasing over 30% in the third quarter [5] - Merchants in the Managed Markets program, which provides a complete international setup, sold to an average of 83 countries and saw international sales rise by over 40% [6] - The company is also adopting an omnichannel model, offering comprehensive solutions for both online and offline retailers, with offline GMV growth outpacing the overall company total in the quarter [6] Valuation Perspective - Despite a high valuation, with a forward one-year P/E ratio of 54, the company is expected to continue its growth trajectory, suggesting potential rewards for patient investors [7]