I found this tongue in cheek response from Lutke to be rather unbecoming of a CEO. Granted, the tweet about him “dumping $400m in stock on shareholders” was rather scathing, and I’m sure stuff like that gets old, but he really isn’t doing himself or the company any favors with his sarcastic response. Maybe I’m just not in a laughing mood…but I’m curious how this comes off to those of you with a much larger SHOP allocation than myself.
https://twitter.com/tobi/status/1073646638466514944
Bear
Seems like a tame response by Musk standards
Agree with you 100%. Lutke’s response should have been, “I understand your concern. But it’s the right move, because of x, y and z.” For me charismatic Tweeting is pretty much a dealbreaker. I prefer leaders who are more experienced, who are quiet, boring, nose-to-the-grindstone types who let the numbers do the talking. Pure guess here is I think in hindsight, in terms of avoiding losses, this is going to turn out to be one of Saul’s best sales.
I’ve found relief in avoiding companies whose CEOs tweet. Nothing good ever comes from that. Generally, it signals arrogance or defensiveness… distractions from running/growing the firm they represent.
🆁🅶🅱
Tweeter Chris posts an OT and hurtful, some could say shortsighted, remark on Tobi’s tweet.
Sounds like Chris is feeling the short term pain of “news” and not understanding the thesis of using capital to boost growth in other geographies and enhancing platforms. I know that doesn’t get much credence here either.
Chris gets a remark that means what the company did in selling shares is LEGIT; i.e. legal, good practice, and will be proved right.
Notwithstanding the tweet crits here, I think Tobi’s LEGIT.
Joe
Long SHOP - and referred SHOP Fool worry warts last week here to Sauls board to one of the richer threads of the month…Valuing Our High P/S Co’s 3 years out…started by mekong and having a link in replies to ethan and Gaucho’s post on share dilution of ZS. I liked your post on P/S too Paul: The key-est numbers - that helped me get a grip on how to think about these companies. Note SHOP was in the 15-16 P/S category now down to 13.7 with Mkt Cap taking a hit, now a little larger than the Saul stocks at $14.45B. With 38% CAGR revenue expected out to 2022 and analysts expected adj. net income CAGR of 126% for the next 2 years, I’m sticking.
With 38% CAGR revenue expected out to 2022 and analysts expected adj. net income CAGR of 126% for the next 2 years, I’m sticking.
Interesting to hear your take, Joe. Where do the above numbers come from?
Bear
My broker (IB) has “Company Fundamentals” for most instruments. It has a lot of info like financial statements, ratios, and includes analysts ratings (there are 12 following SHOP). A link is provided to their Tip Ranks page. There’s details on estimates, high , low, median, mean. I used mean estimates. Here is what’s listed
Year Rev (E)* Actual Adj net income (E)* Actual
2015 $ 196MM $ 205MM $ (10.7)MM $ (7.7)MM
2016 381MM 389MM (12.6)MM (10.3)MM
2017 660MM 673MM 5.3 MM 15.2 MM
2018 1,057MM 33.8 MM
2019 1,475MM 77.7 MM
2020 1,955MM 163.9 MM
The data shows out to 2022 but I discount that becasue it’s just too far to predict.
On the revenue side they’re TTM is $952MM from checking M*. They need 4Q18 to be $328MM to make the estimate, +47% YoY and +21½% sequentially. IB has the 4Q18 Rev estimate at $328MM, so seems legit :-). IB also showing next 3 quarters at $308 to $373MM.
On the adj net side they’re needing $22.4MM to make analysts $33.8MM. In the 3Q report, guidance says this…
For the full year 2018, Shopify currently expects:
Revenues in the range of $1.045 billion to $1.055 billion
GAAP operating loss in the range of $95 million to $97 million
Adjusted operating profit in the range of $8 to $10 million, which excludes stock-based compensation expenses and related payroll taxes of $105 million
For the fourth quarter of 2018, Shopify currently expects:
Revenues in the range of $315 million to $325 million
GAAP operating loss in the range of $15 million to $17 million
Adjusted operating income in the range of $16 million to $18 million, which excludes stock-based compensation expenses and related payroll taxes of $30 million
So the analysts are expecting a beat for 4Q18. You know what happens if they just “meet”…even on the high end it seems.
I’m also aware of “analysts models” and know that Mr. Tobi could keep expenses higher for longer. To that end here’s the estimates of CapEx going forward with past years actual - again mean analysts estimates for future…in $ millions…
2015 16.5MM
2016 26.2MM
2017 20.0MM
2018 30.6MM
2019 38.4MM
2020 47.9MM
So no slowdown here
R&D remains 22% of sales…huge but I don’t know how that compares to others.
Analysts must see a future slow down in another astounding number… Sales & Marketing expense almost 35% of sales now.
Joe
Not Scared
…didn’t mean to press post before commenting on Cap Ex compared to Op’s Cash Flow which turned positive in 2015. It’s been running $8MM to $16MM in the past few years with TTM at $19MM according to M* so free cash is not happening anytime soon.
Joe