Shopify Won't Remain Cheap For Too Long

(13min)

Summary

  • Shopify's revenue growth remains robust, with Q4 FY24 revenue up 31% YoY, driven by strong GMV growth and merchant acquisition across enterprise, offline, and international markets.
  • Despite recent stock price volatility and macroeconomic uncertainties, Shopify's long-term growth story is intact, with management optimistic about expanding its market share with targeted product innovation.
  • In the meantime, operating leverage is improving, with operating income up 60% YoY and free cash flow margins at 22%, surpassing the Rule of 50.
  • I see a 20% upside potential with a price target of $125, making this an attractive entry point for long-term investors.

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

JHVEPhoto

Introduction & Investment Thesis

I last wrote about Shopify (NASDAQ:SHOP) (TSX:SHOP:CA) in November, where I had reiterated my “buy” rating with a price target of $137 per share.

While the stock came close to my price target at $129 (6% away

I am Amrita and I write primarily about growth software stocks. 

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Amrita runs a boutique family office fund in beautiful Vancouver, where she leads the investment strategy for the family fund. The fund's objective is to invest capital in sustainable, growth-driven companies that maximize shareholder equity by meeting their growth-oriented goals. In addition, she also started her own award-winning newsletter, The Pragmatic Optimist which focuses on portfolio strategy, valuation, and macroeconomics in concert with her husband Uttam Dey who is also a contributor on Seeking Alpha. Prior to cofounding her fund, Amrita worked for 5 years in high-growth supply-chain start-ups in downtown San Francisco, where she led strategy. During her time in the Bay Area, she also worked with venture capital firms and start-ups, where her efforts led her to grow the user acquisition business. During this time, she was introduced to investment portfolios and was able to maximize returns for clients during the pandemic. The cornerstone of Amritas work rests on democratizing financial literacy for everyone and breaking down financial jargon and complex macroeconomic concepts into formats that are easily digestible but more empowering than the typical investment thesis. Her newsletter has been featured as the Top Newsletter in Finance on popular newsletter platforms and she aims to bring her ideas to Seeking Alpha as well.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SHOP either through stock ownership, options, or other derivatives. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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