I no sooner posted that, while I tried strictly to follow an investing discipline, I did have a holding in SHOP because ‘I am not made of stone’ than ensuing events made it rather ironic. I have sold that holding to retain my profit fearing things may have further to go. This was my calculation of downside risk:
I decided to use a PS of 11. While that is comparatively very high among its peers in Saas, I do recognize SHOP looks like a phenomenon in a class of its own. The plain fact is I simply have no idea at what multiple of sales SHOP should - or in the future will - trade yet I need a figure to work on! Ignorance is not bliss and I am out of my depth. I arbitrarily choose 11. Select your own multiple.
I believe 2017 sales are expected to be $645,000,000.
$645m. x a PS of 11 = market cap. $7,095,000,000.
I make the market cap. at the moment $10,178,149,000, representing a PS of 15.8.
So the cap./share price would have to fall about 30% to get down to a PS of 11.
This calculation may be utterly worthless but it was what I acted on. A bird was in the hand and I felt it might fly away.
I do not think these modern-day phenomena can be ignored however, so SHOP is back on the watchlist… but without a price. As others have said, good luck to those holding who have a better grasp of valuation. I am going to play this one from the sidelines for now.