Why did Shopify drop so much this week? Is Shopify “Hell of A Deal” now?

Growth

  • 😀 Quarterly total revenue +41% (977.74M -> 1.38B)
  • Subscription Solutions +26% (351M)
  • Merchant Solutions + 47% (1029M)
  • 😟 Revenue growth guidance in 2022 won’t be as fast as 2021.

Profitability

  • 😖 Shopify’s quarterly operating Income -87% (112.54M -> 14.4M). Although Square and Etsy haven’t released Q4 earnings yet, Shopify’s decreasing rate could likely be the worst.
  • 😒 Shopify’s operating margin decreases to 1% from 12% one year ago.
  • Amazon would probably have the highest operating margin and lowest operating income decrease rate after Square and Etsy released Q4 result on Feb 24th.

Valuation

  • Different from Amazon and Etsy, Shopify’s business model is more similar to Square and SaaS companies like Salesforce or Twilio.
  • Salesforce and Twilio’s P/S ratios are both around 10, which are also much less than Shopify’s.
  • Square’s revenue is “boosted” by its Bitcoin revenue. However, even without that, SQ’s P/S ratio would still be less than 10, which is much less than Shopify’s 19.4.

Conclusion.

Shopify’s slow-down revenue guidance and decreasing profitability might be the main reasons why its stock price -20% this week.

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