Stockchase Opinions

Mohsin Bashir Shopify Inc. SHOP-T BUY Sep 20, 2018

This is a very much loved Canadian Tech stock. This is a rarity. The reason this has been so successful is that they have proven they are excellent in allowing companies to optimize. They have grown their revenues 70% year over year. The question is if the recent rebound is sustainable. They have to surpass analysts expectations. That community is looking for top line growth. This company has always tracked a 4-6% surprise above expected revenues.

$215.680

Stock price when the opinion was issued

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BUY ON WEAKNESS

Look at the 5-year chart. The peak in 2021 concerns him on valuation. Not surprising that it came into resistance when it entered a similar window earlier this year. Likes buying dips, don't chase here.

TOP PICK

Fine job in utilizing AI, becoming more efficient. Cosmetics and clothing are two of its bigger channels, and these are among the easiest to switch supply chains. This makes those segments relatively less impacted by trade and tariff volatility. No dividend.

(Analysts’ price target is $159.57)
DON'T BUY

No idea if there's more upside. Very expensive. Doesn't have the consistency he looks for. Better opportunities at better prices elsewhere.

BUY

AMD vs. Shopify

Prfers SHOP. AMD is fully priced. He targets $125 USD for SHOP. Don't sell AMD, just raise some calls against it.

COMMENT

It is growing at 20% per year but trading at 100X earnings so there is a valuation risk. It is a good company but not so much the stock. It uses different software for different vendors and expanding internationally. It could go sideways or down.

TRADE

Very high valuation. On any fears of potential slowing, stock moves quite a bit. People probably trade it a lot. Great company, democratizing e-commerce for everybody. Tariffs may impact volumes until we get more clarity.

HOLD

Still a decent runway to price target of $178, so don't trim. Look to trim if it gets above $170. Because of the volatility, writing some calls would be pretty lucrative.

WATCH

Pay attention to the old highs (~$200), and stock's getting close to them. Recent peak does appear to be breaking the last one. Probably will get to the $200 area, so still a few bucks to go. From there, that's when to start chewing your nails, as it's stalled there before when those old buyers just want their money back.

RISKY

A tough one. Lots of speculation in the name. If you look at it with a purely quantitative view, you'd be a bit nervous. Still in the high growth, ramping up operations, risky "startup" phase. Improving ROC. Valuation makes him pause.

Doesn't have a problem owning it, but should not be core. If your portfolio has 20 stocks, 5% each, then this one should only be ~2%. With today's earnings pop, good to trim.

PARTIAL SELL
Popped on earnings, dropping today.

He trimmed a bit. He'd beef up the position again if it dropped 10-15%. One of the companies that will dominate  the world for the next 1-2 decades.