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Stock Analyst Note

We are maintaining our fair value estimate of $68 per share for narrow-moat Shopify after the company reported generally good first quarter results but offered guidance that was below our expectations. Given currency fluctuations, our fair value for Canadian shares rises to CAD 93 from CAD 91. We surmise that the sharp selloff in Shopify’s shares stem from the weak guidance, although our prior estimates were more conservative than FactSet consensus, so it is less of a miss, in our view. Like last quarter, we are surprised by expense growth, particularly in sales and marketing, especially during a time when software companies have tightened up spending and have been overdelivering on margin performance. After thinking the shares were overvalued in recent months, we now see modest upside to the stock after today’s selloff.
Company Report

Shopify strives to be a one-stop shop for small retail businesses, especially those that are e-commerce primarily, only, or first, and has made great strides in addressing the needs of enterprise customers as well. The company offers a simple but robust e-commerce platform with a variety of related add-on functionalities that ultimately converge into a turnkey solution for small and midsize businesses, or SMBs. Shopify’s rapid rise since its 2015 initial public offering underscores a nascent software niche that is rapidly increasing and demonstrates a winning solution. We believe the company has established a narrow moat, as switching critical e-commerce platforms has financial and operational costs for an already resource-constrained SMB. We forecast robust top-line growth benefiting from e-commerce trends over the next several years.
Company Report

Shopify strives to be a one-stop shop for small retail businesses, especially those that are e-commerce primarily, only, or first, and has made great strides in addressing the needs of enterprise customers as well. The company offers a simple but robust e-commerce platform with a variety of related add-on functionalities that ultimately converge into a turnkey solution for small and midsize businesses, or SMBs. Shopify’s rapid rise since its 2015 initial public offering underscores a nascent software niche that is rapidly increasing and demonstrates a winning solution. We believe the company has established a narrow moat, as switching critical e-commerce platforms has financial and operational costs for an already resource-constrained SMB. We forecast robust top-line growth benefiting from e-commerce trends over the next several years.
Company Report

Shopify strives to be a one-stop shop for small retail businesses, especially those that are e-commerce primarily, only, or first, and has made great strides in addressing the needs of enterprise customers as well. The company offers a simple but robust e-commerce platform with a variety of related add-on functionalities that ultimately converge into a turnkey solution for small and midsize businesses, or SMBs. Shopify’s rapid rise since its 2015 initial public offering underscores a nascent software niche that is rapidly growing and demonstrates a winning solution. We believe the company has established a narrow moat, as switching critical e-commerce platforms has financial and operational costs for an already resource-constrained SMB. We forecast robust top-line growth benefiting from e-commerce trends over the next several years.
Stock Analyst Note

Narrow-moat Shopify reported strong fourth-quarter results, including better-than-expected revenue and meaningfully better profitability relative to our model. Guidance was also a little better than anticipated on the top and bottom lines. We have been expecting meaningful increases in profitability and Shopify has delivered. However, we think our profitability estimates skew below broader investor expectations on our more cautious views on the financial health of consumers, gross margin expansion, and results that have been volatile. We think the negative stock reaction is a function of elevated expectations around margins, as management guided operating expenses to increase in the low-teen percentage area sequentially despite a normal seasonal decline in revenue. Still, the outlook was better than we anticipated, so we continued to refine our near and medium-term profitability assumptions upward, which led us to raise our fair value estimate to $68/CAD 91 per share from $60/CAD 83. After the strong run the shares had throughout 2023, we now see shares as overvalued.
Stock Analyst Note

Narrow-moat Shopify reported excellent third-quarter results, including better-than-expected revenue and meaningfully better profitability. Guidance was a little better than we anticipated on the profitability front but a little shy of our revenue assumption. That said, we were anticipating a dramatic increase in profitability in the near term as a result of headcount reductions, price increases on the standard version, and the disposition of the margin-dilutive logistics business. Therefore, our profitability estimates have increased only slightly. We are increasing our fair value estimate to $60/CAD 83 per share from $57/CAD 76. After the roughly 20% spike in Nov. 2 trading, we see the stock as once again fairly valued.
Company Report

Shopify strives to be a one-stop shop for small retail businesses, especially those that are e-commerce primarily, only, or first. The company offers a simple but robust e-commerce platform with a variety of related add-on functionalities that ultimately converge into a turnkey solution for small and midsize businesses, or SMBs. Shopify’s rapid rise since its 2015 initial public offering underscores a nascent software niche that is rapidly growing and demonstrates a winning solution. We believe the company has established a narrow moat, as switching critical e-commerce platforms has financial and operational costs for an already resource-constrained SMB. We forecast robust top-line growth benefiting from e-commerce trends over the next several years.
Stock Analyst Note

Narrow-moat Shopify reported good second-quarter results, including meaningful upside to our estimates for both revenue and profitability. The firm has had a busy year so far, with the sale of its logistics business to Flexport, a price increase, significant headcount reductions, and recent introductions of artificial intelligence features Sidekick and Magic. Management also provided guidance that was better than we were expecting, although given the logistics sale, we were expecting some disconnect from our model. We see generally positive indicators throughout this earnings report. Given results and guidance, along with some adjustment related to the disposition of the logistics business, we maintain our fair value estimate at $57 per share, (CAD 76, from CAD 78). Shares have appreciated significantly this year, leaving shares fairly valued.
Company Report

Shopify strives to be a one-stop shop for small retail businesses, especially those that are e-commerce primarily, only, or first. The company offers a simple but robust e-commerce platform with a variety of related add-on functionalities that ultimately converge into a turnkey solution for small and midsize businesses, or SMBs. Shopify’s rapid rise since its 2015 initial public offering underscores a nascent software niche that is rapidly growing and demonstrates a winning solution. We believe the company has established a narrow moat, as switching critical e-commerce platforms has financial and operational costs for an already resource-constrained SMB. We forecast robust top-line growth benefiting from e-commerce trends over the next several years.
Stock Analyst Note

Narrow-moat Shopify reported busy first-quarter results, with revenue and profitability that exceeded our expectations. Management provided some guideposts for next quarter that point to better performance than we were modeling. It also announced a 20% headcount reduction. Additionally, the company is selling its logistics business, including Shopify Fulfillment Network, to Flexport. We had thought Shopify Fulfillment Network would help drive meaningful growth but pressure margins, especially as it scaled. Given the results, guidance, and our attempt to model Shopify without its logistics business, we are raising our fair value estimate to $57/CAD 78 per share from $45/CAD 60. We expect some changes to our model as management provides further information upon closing the sale of the logistics business. Until then, we view the shares as fairly valued after the postearnings pop.
Company Report

Shopify strives to be a one-stop shop for small retail businesses, especially those that are e-commerce primarily, only, or first. The company offers a simple but robust e-commerce platform with a variety of related add-on functionalities that ultimately converge into a turnkey solution for small and midsize businesses, or SMBs. Shopify’s rapid rise since its 2015 initial public offering underscores a nascent software niche that is rapidly growing and demonstrates a winning solution. We believe the company has established a narrow moat, as switching critical e-commerce platforms has financial and operational costs for an already resource-constrained SMB. We forecast robust top-line growth benefiting from e-commerce trends over the next several years.
Company Report

Shopify strives to be a one-stop shop for small retail businesses, especially those that are e-commerce primarily, only, or first. The company offers a simple but robust e-commerce platform with a variety of related add-on functionalities, including the Shopify Fulfillment Network that ultimately converge into a turnkey solution for small and medium-size businesses. Shopify’s rapid rise since its 2015 initial public offering underscores a nascent software niche that is rapidly growing and demonstrates a winning solution. We believe the company has established a narrow moat, as switching critical e-commerce platforms has financial and operational costs for an already resource-constrained SMB. We forecast robust top-line growth benefiting from e-commerce trends over the next several years.
Stock Analyst Note

Narrow-moat Shopify reported fourth-quarter results that were ahead of our expectations from a revenue and operating margin perspective. On the positive side, the company provided guidance for the first quarter, the first time in some time it has done so. However, the outlook is light relative to our expectations. We continue to believe that the Shopify Fulfillment Network is likely to gain significant traction with customers and along with continued penetration of other merchant solutions, should help drive strong growth over the next decade. Given results and guidance, we are maintaining our fair value estimate of $45 per share, (CAD 60, from CAD 61 previously solely due to currency moves). A rebound in software stocks coupled with rumors about activist shareholders stepping in have left the shares fairly valued in our view.
Stock Analyst Note

Shopify reported third-quarter results that were ahead of our expectations from a revenue and operating margin perspective. The last time narrow-moat Shopify delivered such solid results was the second quarter of 2021. We are therefore left to wonder if the firm has turned the corner just as the broader economy faces the looming specter of recession. The lack of guidance from the company does not help raise our conviction level. The fact that incoming CFO Jeff Hoffmeister has been a prominent investment banker suggests Shopify will step up its acquisition efforts. These factors combined are consistent with our Very High Uncertainty Rating. We are maintaining our fair value estimate of $45 per share, (CAD 61, up from CAD 58 due solely to currency moves). We see upside to share from here but the high uncertainty would focus our attention elsewhere within software. We continue to believe that the Shopify Fulfillment Network is likely to gain significant traction with customers and along with continued penetration of other merchant solutions, should help drive strong growth over the next decade.
Company Report

Shopify strives to be a one-stop shop for small retail businesses, especially those that are e-commerce primarily, only, or first. The company offers a simple but robust e-commerce platform with a variety of related add-on functionalities, including the Shopify Fulfillment Network, or SFN, that ultimately converge into a turnkey solution for small and midsize businesses, or SMBs. Shopify’s rapid rise since its 2015 initial public offering underscores a nascent software niche that is rapidly growing and demonstrates a winning solution. We believe the company has established a narrow moat, as switching critical e-commerce platforms has financial and operational costs for an already resource-constrained SMB. We forecast robust top-line growth benefiting from e-commerce trends over the next several years.
Stock Analyst Note

Narrow-moat Shopify reported second-quarter results that once again fell short of our expectations. Although we remain bullish on e-commerce over the long term and the company's plan to build out a fulfilment network, the near-term outlook for Shopify remains uncertain (as evidenced by our very high fair value uncertainty rating) as we search for a new normal for e-commerce as COVID-19 eases. We continue to believe that the Shopify Fulfillment Network is likely to gain significant traction with customers and along with continued penetration of other merchant solutions, should help drive strong growth over the next decade. On July 26, the company announced it was laying off 10% of its workforce based on the admission that e-commerce spending, while growing, had not permanently shifted. It is unusual for a medium-size, rapidly growing software company to undertake a material reduction in force. After results, we lower near-term profitability assumptions but make no material longer-term changes, and thus we maintain our $45 (CAD 58) per share fair value estimate. We see upside to shares from here, but the high uncertainty would focus our attention elsewhere within software.
Company Report

Shopify strives to be a one-stop shop for small retail businesses, especially those that are e-commerce primarily, only, or first. The company offers a simple but robust e-commerce platform with a variety of related add-on functionalities, including the Shopify Fulfillment Network, or SFN, that ultimately converge into a turnkey solution for small and midsize businesses, or SMBs. Shopify’s rapid rise since its 2015 initial public offering underscores a nascent software niche that is rapidly growing and demonstrates a winning solution. We believe the company has established a narrow moat, as switching critical e-commerce platforms has financial and operational costs for an already resource-constrained SMB. We forecast robust top-line growth benefiting from e-commerce trends over the next several years.
Stock Analyst Note

Narrow-moat Shopify reported first quarter results that fell well short of our expectations. Although we remain bullish on e-commerce over the long-term, the near-term outlook for Shopify remains uncertain (as evidenced by our very high fair value uncertainty rating) as we search for a new normal for e-commerce in a post-COVID world. Combined with modest negative revisions to our long-term growth estimates and meaningfully lower profitability assumptions throughout our forecast, we are cutting our fair value estimate to $450 per share from $730 (to CAD 580 from CAD 930 for Canadian shares). Shares appear fairly valued to us.
Company Report

Shopify strives to be a one-stop shop for small retail businesses, especially those that are e-commerce primarily, only, or first. The company offers a simple but robust e-commerce platform with a variety of related add-on functionalities, including the Shopify Fulfillment Network, or SFN, that ultimately converge into a turnkey solution for small and midsize businesses, or SMBs. Shopify’s rapid rise since its 2015 initial public offering underscores a nascent software niche that is rapidly growing and demonstrates a winning solution. We believe the company has established a narrow moat, as switching critical e-commerce platforms has financial and operational costs for an already resource-constrained SMB. We forecast robust top-line growth benefiting from e-commerce trends over the next several years.
Stock Analyst Note

We are lowering our fair value estimate to $730 from $862 (to CAD 930 from CAD 1,070 for Canadian shares) after narrow-moat Shopify reported fourth-quarter results that were mixed relative to our expectations. We think investors have been ratcheting their expectations down after reports from some other notable e-commerce companies. We remain bullish on e-commerce, but we have lowered our growth and margin estimates for the firm as we search for a new normal with lockdowns ending and as the firm accelerates the investment phase for the buildout of its Shopify fulfilment network (SFN). Given these two significant moving parts, we remind investors of our very high uncertainty rating and note that we have watched shares boomerang over the last two years to the point that we now view shares as fairly valued rather than significantly overvalued.

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