| 1 | Shopify displays a strong growth of its financial figures, although this does not guarantee that the stock is worth buying. |
| 2 | The action Shopify has experienced great volatility in recent years, skyrocketing during the pandemic before falling drastically. |
| 3 | Currently, the stock is up 55% over the past 12 months but remains far from the highs reached in 2021. |
| 4 | Shopify is refocusing on its two flagship products: software e-commerce and tools payment. |
| 5 | Shopify’s revenue grew 25% year over year, with annual revenue of $7.7 billion. |
| 6 | With a free cash flow margin of 16%, Shopify is starting to show significant profits. |
| 7 | Despite its performance, the stock is considered expensive at a current price of $80, with a market cap of $100 billion. |
| 8 | Shopify projects a revenue growth rate of 20% for the next five years. However, this makes the stock relatively unattractive. |
From its meteoric rise during the pandemic to its abrupt fall, the action of Shopify experienced dizzying highs and lows. As the company refocuses on its two fundamental pillars, should we consider buying this stock below $100? Let’s take a closer look at its current strategy, growth and valuation to evaluate this investment opportunity.
Shopify and its Volatility: A Roller Coaster Action
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Over the past few years, Shopify stock’s journey has been anything but linear. Its spectacular jump, quadrupling its value at the end of the pandemic, gave way to a dizzying fall of almost 90% when the euphoria of e-commerce faded. Lately, the stock has rallied 55% over 12 months, but remains far from its 2021 highs. This volatility is typical of high-growth stocks, which are usually accompanied by large market swings.
Back to Basics: A Restructured Strategy
The pandemic has seen Shopify harbor big ambitions, going so far as to challenge Amazon in logistics and explore cryptocurrencies. However, these initiatives proved costly and short-lived. At the start of 2023, the company had an operating loss of $1 billion and negative cash flow. Faced with this, Shopify has chosen to go back to basics: its two flagship platforms. The first, consisting of a suite of software tools for e-commerce, allows businesses to create and manage their online experiences. The second, a suite of payment tools, helps retailers process payments online and at physical points of sale.
Solid Revenue Growth and the Quest for Profitability
Adjusting for the sale of its logistics business, Shopify saw its revenue increase 25% year-over-year to reach $2 billion in the most recent quarter. An achievement which increased its revenues by 31% over the same period the previous year. This performance exceeds that of the e-commerce sector as a whole, a sign that Shopify is gaining market share over its competitors. Additionally, the company introduced pricing power dynamics to its subscription solutions, resulting in few cancellations and demonstrating the robustness of its business model.
Shopify: A Bet Under 100 Dollars?
One of the key questions for Shopify today is its valuation. Even with a 50% drop from its highs, the stock still trades at a hefty valuation of $100 billion, more than ten times its sales over the last twelve months. With a financial model forecasting 20% growth in annual revenues over the next five years, the company could boost its turnover to $19 billion with an operating margin increasing to 20%, or around $3.8 billion. gains in five years.
Compared to its current market capitalization, this reflects an anticipated estimate of its five-year price/earnings (P/E) ratio equivalent to 26, aligned with that of the S&P 500 index. If the stock is expected to trade at this market multiple in five years, this may seem unattractive to some investors. So, for these, buying Shopify stock below $100 should be carefully considered, because it does not appear to be an urgent deal.
| Criteria | Assessment |
| Revenue growth | 25% year-on-year |
| Free cash flow margin | 16%, up |
| Operating margin | 11.8% |
| Workforce Chores | 20% layoffs |
| Current market capitalization | 100 billion dollars |
| 5-year forecast P/E valuation | 26 |
| Investment in new initiatives | Drastic reduction |
| E-commerce market share | Constant increase |
| Current stock price | About 80 dollars |
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Impressive Growth
- Annual revenue of $7.7 billion
- 25% year-over-year growth
- Gaining market share in the e-commerce sector
- Annual revenue of $7.7 billion
- 25% year-over-year growth
- Gaining market share in the e-commerce sector
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Volatility and Risks
- Significant fluctuations in stock market value
- Market capitalization of $100 billion
- Valuation at 10 times the sales of the last 12 months
- Significant fluctuations in stock market value
- Market capitalization of $100 billion
- Valuation at 10 times the sales of the last 12 months
- Annual revenue of $7.7 billion
- 25% year-over-year growth
- Gaining market share in the e-commerce sector
- Significant fluctuations in stock market value
- Market capitalization of $100 billion
- Valuation at 10 times the sales of the last 12 months