I know SHOP is another less followed company on this board, but for those who are interested, Wayfair just had a blowout earnings release. Although they are quite different businesses, this is additional evidence that online shopping is kicking butt. We have already heard from SHOP in the last month that they are experiencing black friday like traffic on a daily basis, and SHOP reports earnings tomorrow morning.
Personally, I struggle with the thought of buying SHOP at its current valuation (p/s of 49, relatively very high for the company and relatively high compared to its peers) but the long term story is very enticing, and now we have some evidence that the short term story may also be quite rosy. Furthermore, some companies will just always appear over valued. That doesn’t make them bad investments. As we’ve said before, Salesforce is a great example of this. It has looked expensive pretty much always, and if over fixation on the p/s ratio stopped you from buying, you missed out on huge gains.
I will also remind the board that last quarter, the company reported its first revenue yoy acceleration ever, hitting 47% compared to the prior year. I know we prefer higher rev growth companies for the most part, but it is definitely worth consideration right now, given its long term viability and massive total addressable market.
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I think your connection of Wayfair to Shopify is a good one, but I think there may be an even better one and that’s Carvana. If you consider the Wayfair story - who would buy a couch online without sitting on it, measuring it, and perhaps taking a picture of it to ‘view’ it in their home? But people do now!
Now extrapolate that to the car buying experience and the ONE thing customers do when buying a used car, the test drive. If all other elements can be replicated online, then Carvana can win in the new world. The stock was obliterated because of their heavy debt load, but they had a secondary offering and the stock has been off to the races ever since. They report tomorrow as well,
P
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I know SHOP is another less followed company on this board, but for those who are interested, Wayfair just had a blowout earnings release. Although they are quite different businesses, this is additional evidence that online shopping is kicking butt. We have already heard from SHOP in the last month that they are experiencing black friday like traffic on a daily basis, and SHOP reports earnings tomorrow morning.
I just looked at the Wayfair chart. It’s insane. It dropped from a high of about 160 just over a year ago, steadily drifting downward, and bottomed at 21.6 only about 7 weeks ago!! It’s now at 170. That’s about an 8 fold rise in just 7 weeks. Totally insane. It’s benefiting from the shift to ecommerce but I don’t think it looks like as clear a winner as others. It wasn’t killing it before the pandemic. This market is very overheated now. Some names seem very deserving but others look incredibly overbought, even some of the better tech names.
SHOP is likely deserving but also seems due for some time of pull back with profit taking. If the market ever takes a breather and pulls back, it’s best to have a list of names to buy. CRWD looks like it has had a great run but looking at the valuation and fundamentals compared to other growth stocks (before and after Covid), it may just be getting started - so I added when it dipped a little today while everything else was soaring.
Dave
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Regarding Carvana, and I do not own them or follow their numbers so take this with a grain of salt, but I assumed their traffic was way down this month. I’m in the process of selling my car and they would not purchase mine from me since I wasn’t buying one of theirs. They would only buy on a trade-in. I assume that means this quarter and next will look pretty rough.
-AJ
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While I get the connection of online shopping, Shopify is a cloud store platform and Wayfare is just a huge drop-shipper. One which we have had repeated bad experiences with personally, having used them to furnish an investment property and also for a few items at home. Our return rate for quality issues was probably ~70%. They were always very helpful with returns and replacements and a more than once just told us to keep or throw out the old item ourselves (I’m talking bar stools and a decent sized mirror). If their customer service was as bad as the rest they would probably die off. I guess you can say I am not bullish but it wouldn’t be the first time a service I hated did well for investors.
Shopify on the other hand is really quite a unique offering for individuals and small business online stores. If you want to get in to managing your own servers and software updates there are more options, such as the popular WooCommerce platform built on top of WordPress. I’ve spun up several stores for myself and friends over the last couple of years (on the side, this is not my normal business) and everything from how easy it is to set up, to the customer support, to the app store is just so well done. They made vast improvements over the last few years as well. Setting up things like multiple channels of payment collection, social media store integrations (product syncing and payment channels), shipping, tax collection, basic SEO, cart flows, etc, etc, etc is just SO fast and easy. If you have a little coding skill you can really do a lot right in the web interface too.
Since Shopify is a platform they can earn revenue from many different sources as well. It really is amazing what they have built.
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