Shopify Inc. (SHOP-T)

Over-expanded during pandemic. Partnership with AMZN will help. Valuation still too high despite pullback.

We still like SHOP and suggest it as a long term growth pick. There is no specific news today, but last week Tik Tok came out with an app that may allow merchants to be less reliant on existing e-commerce players. Last week Ark Funds also announced it had sold some of its SHOP positions. Profit taking could also be at play, the stock is still up 72% YTD. Tech in general has also been weak of late. 
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It's a bit pricey but he likes it. Online shopping will continue to grow and SHOP is a mainstay for Canada.

Soared in 2020-1, but plunged in 2022. It was valued as if it were Apple or Microsoft, but it's smaller. The PE is much more reasonable now and a good entry point now. That said, he prefers other tech stocks.

Part of that is the size. US investors probably don't know LSPD, whereas they do know SHOP. SHOP is the 800-pound gorilla in Canada and the US for small companies that run their own website, as well as for big companies that run a website and do e-commerce. 

LSPD has more of a niche in restaurants. They will be successful over time, but there have been challenges with restaurants. Over time, it should catch up to SHOP as far as percentage return goes.

Chart formed a nice cup and is breaking out. Has lots of upside unless it breaks down.

Working together with AMZN is a positive, but he hasn't yet done deep homework on that headline. Super expensive, huge runup since last fall. Overpriced. Good entry point would be levels of October 2022.

He targets C$82. Everything is working very well for them. They're the pride and joy of Canadian tech, used in 175 countries by companies of all sizes, used in front- and back-end of business. They divested their fulfillment business to focus on e-commerce as a service. It is volatile, so trim at $80.

Great business, but diversifying to compete with AMZN hurt them. Will continue to grow, good time to buy. There's value, especially to small businesses. E-commerce companies all need to reset business models post-Covid, might take some time.

Hard to put price targets on high-multiple tech companies. Strong comeback. Economy slowing should not have huge effect on it. If you've made quick money, he'd be tempted to take some profits.

He changed his tune on this recently. They made a mistake by getting too deep into fulfillment and logistics. But changes in the board and executive have sharpened their growth and profitability. They sold their logistics business. The street sees SHOP growing earnings 800% YOY given job cuts and closing fulfillment.

Canada does not have nearly the same tech landscape that the US does, and SHOP has been one of Canada's largest tech successes. This provides support at a high level for the company to continue to succeed. Understanding its technology, it is more than just a flash in the pan and has a long tail to it. Ecommerce and Shopify's presence have a 'lindy effect' and this is essentially its staying power. Digital spending is here to stay, and brands need PoS, logistics, inventory management and other systems to manage online sails. 

We like Shopify's strong presence across North America, its resiliency across business cycles, and vision from the management team. It is at a high valuation relative to most other companies, but we feel this is justified given its growing market share and technology supporting the company. 

There are risks from certain competitors (AMZN, LSPD), but most of these risks fade away over time as investors and businesses realize the impressive technology stack that SHOP has in comparison. We believe it has created a competitive advantage for itself, and there are certain businesses that AMZN has avoided due to SHOP's significant presence in those businesses. 

We continue to like the name as part of a Canadian tech success story.
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It's fairly valued now. He owns a smaller position than before. 

Owns small amount in Canadian portfolio.
Company still expensive relative to peers.
Expecting more growth from company.
Has been trimming due to valuation.
Not buying at this time.
 

Trades at almost 140x earnings. On a multiple of revenue, it's trading at 10x. Hard to buy on any fundamental basis, a stock you buy on momentum. Fascinated by the business model. Cult following has driven the high valuation. Doesn't fit with his investment mandate. About 1/3 of the TSX returns YTD are SHOP alone. Volatile.