Shopify - My Take

Investment Analysis Clubs Saul’s Investing Discussions
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Hi Saul, since there seems to be a lot of SHOP investors and no responses to your post other than the huge number of recs you got for this post, i decided to reply.

I totally understand your argument and it is basically based on revenue growth rates shrinking. And you are right they definitely are shrinking on a percentage basis. But as these growth rates continue and the size of the company increases, is that a surprise? After all this is a company that has over $1 Billion in sales in 2018 and is still growing at over 50%

Another way to look at it…


Year.      Revs     Incr revs 
                 from prior year
2013.         50
2014.        105.      55
2015.        205.     100
2016.        389.     184
2017.        673.     284      
2018        1073.     400

So yes, the percentage revenues were decreasing but the revenue increases each year were still getting bigger every year. Perhaps a limitation of starting from small numbers?

So just for fun, if you compare to Twilio, their most recent quarterly revenues were, TWLO=204, SHOP=344. When shop’s revenues were at 204 for a quarter it was 2017 which was when SHOPs growth rates were as expected. I understand there are big differences between the two and Twilio is clearly exceptional, but the point is how long can percentage growth rates continue to grow as a percentage. But from my eye, the absolute increases in revenue from year to year look like a company that is still growing quite well.

Second point, it seems like one of the big things you didn’t like when you sold last year was that the earnings didn’t look like they were progressing. That in combination with the slowing revenue growth concerned you. But this latest quarter seemed to allay any concerns of earnings growth as the adjusted earnings were 0.26 this quarter vs 0.15 last year. It seems like they are making better progress in this regards now and their potential markets look larger than ever.

So in any event, I own shares in both companies mentioned here and think they both have big potential. I am less challenging you, Saul (I’m not stupid :wink: and more really trying to understand your decision process…

Randy
Long TWLO and SHOP

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