Shopify Inc. (SHOP.TO)

In spite of the fact that sales were up 62%, earnings were down 14%. He understands the company has an annualized sales run rate of well in excess of $200 million, and analysts are still expecting they are going to lose $.10 in 2017. A PE in 2018 of 161X. Great product, growing like crazy, but unfortunately not making a ton of money. An extremely expensive stock with strong underlying sales growth.

He likes this a lot, although it is not necessarily cheap. Had bought this when it was still private. What is going is very, very positive. They allow small manufacturing and other service organizations to become, in a sense, a part of the Amazon network, which is a huge advantage, and are growing very, very rapidly because of that. He remains bullish and positive on the stock, although he has been taking some profits.

#1 in North America, beating out some of the competition. They have 300,000 clients. They can take a small shop operation and give them all the horsepower that the big guys have. There is lots more market out there that they can penetrate.

The market has seen a massive move towards e-commerce, online shopping, etc. Generally, in the technology world, it is a winner takes all type of proposition. Companies that lead and that can make the investments, generally win. This is trading at a market cap of about $5.5 billion range, and will probably do something like $500 million of revenues next year. A terrific business model. It basically helps small and medium-sized businesses get online. At 10X next year’s sales, would you buy it? If you are a patient growth investor, you can nibble away at this kind of name. The growth rate is upwards of 50% for the next few years. They are the leader in this market.

(Market Call Minute.) A high risk name, but they are the very large successful market and a very good bet.

This fits into the theme of cloud-based computing. The company provides the back end to small Internet retailers. They have something like 300,000 companies that use their infrastructure. The companies pay about $50 a month and can buy additional services to strap onto that. They also get a percentage of revenue of about 1.5%. This company is a long way ahead of its competitors. Something new is that they have also gotten into financing their customers, by taking a royalty on the revenue, so that could be a big new business for them also.

A good company. It is not cash flow positive currently, but it is close. They are getting more and more merchants on the platform which brings in the average revenue per user ad increases. There are more delivery and other services being added, which will increase the operating leverage.

Everyone is looking at revenue growth and not earnings. It is very expensive at EBV+9. They will lose $.19 this year and $.16 next year.

An e-commerce solutions provider. If you come up with a business, they can have a website up and running for you within 15 minutes, and be able to take payments for goods and services immediately. They’ve done a great job of integrating a bunch of moving parts. They are targeted towards small and medium-sized businesses, the fastest growing area of the market.

Because of its limited history, it doesn’t really rank well in his process from a fundamental standpoint. Technically it ranks very well and has nice, strong price momentum. He would like to see some earnings and solid cash flow before getting involved. At this time, price momentum and technical aspects look very strong and are going in the right direction.

(Market Call Minute.) If you believe that on-line retail continues to grow, this company provides the infrastructure for smaller companies. It is hitting a new relative strength high, versus the market.

They built a better mouse trap for the smaller retailer. Not earning a ton of money yet, but it has great potential. They have 120,000 online retailers, which allows them to have the same kind of computing power that the big guys have. He sees this continuing to grow.

A great success story. Have done extremely well in terms of revenue growth. Not a typical stock that he would own, but he did buy it on the IPO and sold it afterwards. Valuation is quite high but has been coming down. He needs to see earnings growth. Right now they have top line growth, so the earnings are not there right now. This is more of a typical US tech name.

He has a problem with whether they can build a business with a mote around it so they can make money over the long term. He would watch it for 2 to 3 years before buying it.

The most important thing you can look at with any chart is the highs and the lows. You identify a trend by its peaks and its troughs. The chart on this shows a successive series of lower highs and lower lows. The current low looks to be tested at around $35. It needs to hold that. You need a few more days to see if $35 will hold, to confirm if this downtrend is going to break.