Shopify: Buy The Dip For The Long-Term

May 09, 2022 4:48 PM ETShopify Inc. (SHOP), SHOP:CAAMZN, BABA, CRM56 Comments
J.B. Meathe profile picture
J.B. Meathe
202 Followers

Summary

  • Shopify has had a rough start to 2022 due to fading tailwinds related to the Covid-19 pandemic.
  • SHOP is a long-term winner in becoming the preeminent e-commerce platform for merchants to grow and promote their brand.
  • The company is entering its next building phase of its Shopify Fulfillment Network to establish two-day delivery coverage.
  • SHOP has a unique product offering that differentiates the company from competitors.
  • Assuming a CAGR of 5% for SHOP’s top-line in FY22 through FY25 and discount rate of 12.5%, my DCF model arrived at an intrinsic value of $700.51 (85.57% upside).

Shopify sign on their headquarters building in Ottawa, Ontario, Canada

JHVEPhoto/iStock Editorial via Getty Images

Investment Thesis

I rate Shopify (NYSE:SHOP) a buy due to their differentiation of product offerings, continued improvement of their Shopify Fulfillment Network, and expansion of their point of sale capabilities. Shopify has had a rough start

revenue projections for revenues at 5% CAGR

SHOP's Revenue Projections at a 5% CAGR (Excel)

Capex for next four years for shop

SHOP's CAPEX Forecast (Excel)

Forecasted cf for next 4 years for shop

SHOP's Forecasted Cash Flows (Excel)

WACC calculation to discount cash flows

SHOP's WACC Calculation (Excel)

intrinsic value calculation for shop

SHOP's Intrinsic Value (Excel)

This article was written by

J.B. Meathe profile picture
202 Followers
MBA- John Carroll University. Fundamentals-based Investor with financial modeling experience. Strive to identify companies with valuable operating assets, healthy free cash flow/margins, and that operate within expanding markets.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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