Stockchase Opinions

Mike Archibald Shopify Inc. SHOP-T WAIT Jul 06, 2022

Signals for re-entry? Tech has been under a great deal of pressure, especially those companies that have negative earnings. Down significantly. Technical signals include whether it's starting to outperform the broader market. Is more money flowing into things like tech and discretionary? Fundamentals and financials are challenged. Longer term, still a great growth stock. Into 2023, starts to look more positive.
$43.600

Stock price when the opinion was issued

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BUY

In his momentum mandate. E-commerce turnkey solution for small- and medium-sized businesses. Biggest market share in e-commerce enablement. E-commerce will continue to take market share from bricks and mortar. As it expands capabilities, "take rate" will grow faster. Timely time to own.

BUY

One of only Canadian holdings. Very strong eCommerce company. Founder led which is a great sign. Unsure on how A.I. will impact business. Will continue to own shares. 

DON'T BUY

Never owned it. After it went public, it was growing revenue at 80%, but was unprofitable. He can't value a company losing money. But SHOP Is shifting: revenue growth is falling as margins rise. It trades at 103X PE, which is not good considering their growth rate.

TRADE

Very volatile. Options are very expensive. Sell puts $165 April for around $5. 

PAST TOP PICK
(A Top Pick Mar 08/24, Up 55%)

In his momentum mandate. Increasingly catering to large-enterprise customers, not just small and medium players. Lots of admiration for the business model.

DON'T BUY

Doesn't think it will start a dividend. You actually don't want companies to pay dividends when there are still so many growth opportunities. Investor Day listed 5 areas ripe for growth, problem is market's already pricing this in. Trading ~100x PE, too expensive for him.

DON'T BUY

Down ~30% from recent highs, but still above 200-day MA, which is also moving higher. Technically, shares still look sound. Pricey at 61x forward PE for 20-25% earnings growth, a PEG ratio of 2.5x. He prefers US names for tech.

HOLD
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

The stock has been volatile, as all growth stocks have been recently. We think merchant customers and the company can adapt well enough. However, the consumer spending impact of tariffs remains a variable. Consumer confidence has dropped, and if tariffs induce inflation then business may certainly be negatively impacted overall. Silver linings might be valuation (better of course with the decline) and sentiment (market sentiment is so bad currently any good news could amplify moves). It remains a high Beta stock. Down 11% YTD, it has actually held up better than many others.
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PAST TOP PICK
(A Top Pick Mar 08/24, Up 43%)

Pullbacks are great opportunities to add. Continues to invest in R&D. Payments is a big growth vector, still available in only a handful of countries. Secular rise in e-commerce still has room to run.

BUY ON WEAKNESS

Growth company that hasn't been smashed, despite coming down from highs. Flirting with getting into the NASDAQ 100; if it goes down there, will be a lot more buying. Last quarter earnings were good, subscription revenue up, and executing well. But it's pricey.

Must-own name, but you have to buy it at the right level. Very whippy, use the technicals to buy.