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Shopify Inc Registered Shs -A- Subord Vtg SHOP

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Shopify Growth Continues to Surpass Expectations; Raising FVE to $862

Dan Romanoff, CPA Equity Analyst

Analyst Note

| Dan Romanoff, CPA |

Narrow-moat Shopify continues to deliver exceptional results, with its second quarter representing a continuation of what we think are permanently stepped-up e-commerce trends. Management reiterated qualitative guidance from February but now believes it will finish 2021 with higher adjusted operating income compared with 2020. We had previously modeled growing operating profit dollars for 2021 anyway and have increased our estimate further. Shopify continues to benefit (way more than we and the Street anticipated) from lockdowns that have forced consumers online, which we see as an acceleration of a secular trend. The Shopify Fulfillment Network remains in testing but is likely to gain significant traction with customers and should help drive strong growth over the next decade, in our view. We also see room for further penetration in payments, shipping, and capital. Based on results, we raised our assumptions throughout our model but continue to wrestle with valuation. We are raising our fair value estimate to $862 per share from $788 (CAD 1,080 from CAD 987 for Canadian shares). With the shares trading near $1,560, we still see shares as overvalued.

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Company Profile

Business Description

Shopify offers an e-commerce platform primarily to small and midsize businesses. The firm has two segments: subscription solutions (43% of fiscal 2018 revenue) and merchant solutions (57% of fiscal 2018 revenue). The subscription solutions segment allows Shopify merchants to conduct e-commerce on a variety of platforms, including the company’s website, physical stores, pop-up stores, kiosks, social networks (Facebook), and Amazon. Merchant solutions are add-on products for the platform that facilitate e-commerce and include Shopify Payments, Shopify Shipping, and Shopify Capital.

151 O'Connor Street, Ground Floor
Ottawa, ON, K2P2L8, Canada
T +1 613 241-2828
Sector Technology
Industry Software - Application
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 7,000