Ha, that got your attention, didn’t it.
Darn it, this must be Pick On SHOP Week. Or maybe this author and
the one writing yesterday about shorting Shopify are actually one
and the same. I’ve known for quite a while the day was coming,
but I’m not ready for the party to end. But it ain’t my party. The
probles are 1) not a word of the article is untrue or wrong, and
2) lot of people read this stuff on Seeking Bulls… er, Seeking
Alpha, I mean, and not knowing whether to believe the stories or
not, panic and flee. And the snowball can build quickly and race
downhill. Wouldn’t it be nice if it would really drop (ha!
after I bail, of course) and we could do it all again? What a ride.
Saul, even though I’ve been thinking the very same thing for a week
now, I admit I thought you were kind of wimping out yesterday,
asking if it was time to book some profit on Shopify. But now I
know all the stories and legends about your magic, impeccable
timing are simply truth. I will not doubt you again. And
whatever happens now, whenever we meet, the first round is on me.
Shopify Shares Go Parabolic: Something Will Have To Give
The Shortify Shopify article is not written in the typical bear raid fashion. It has a solid foundation which, IMO, is not enough to short the stock. One would have to know the industry standard practice well to decide if revenue recognition is or not proper.
What the article reveals (to me since I don’t follow the stock) is that recurring merchant services is the fastest growing segment which is very bullish indeed because switching costs are high (if it ain’t broke, don’t fix it).
The Parabolic article did not impress me, it uses a lot of buzz words (parabolic, law of large numbers*) which I don’t think the author understands. Of course growth will slow at some point but if it happens in ten years time you have a long time to make lots of money. To get a feel for how long the growth might last I like to use the “S” curve as a tool. Assuming that the current increase in growth rate is forming the bottom of the “S”, how long will it take for the industry to gain a 75% market share to start forming the top of the “S”? Probably some years.
- The law of large numbers is not what limits growth, it’s market penetration. The law of large numbers is what casinos and insurance rely on to make money. You can’t know when anyone will die but you can determine the life expectancy of a “large number” of people. You cannot know the result of the next roll of dice but you can determine the vigorish of a “large number” of bets. That’s the law of large numbers.