Unless you have been hiding under a rock, you have likely heard of Shopify or at least seen their logo plastered on social media. With the rise of online entrepreneurs, many people have turned to Shopify to launch e-commerce brands.
In fact, as per Shopify's most recent press release, their financial highlights are almost all positive.
Gross Merchandise Volume: $49.6bn +15% TTM (This is the total sales net of refunds passed through Shopify platform)
Total Revenue: Increase of 25% to $1.5Bn
Subscriptions: Increase of 11%
Net Income for Q1 23: $68M (+110% from Q4 22 after a year of qtr/qtr losses)
So far in 2023, Shopify's results are looking far more positive than those recorded in 2022, with net income showing profits. Their GMV increase is impressive whilst comparing to competitors such as Ebay or Etsy, who have been unable to drive more sales than the previous year.
With increased demand and profitability starting to show, it's not surprising Shopify is finding relative strength in recent weeks.
Shopify vs SP500 (relative comparison)
Since the start of the year we can see quite the difference in the performance in comparison to the index, with Shopify significantly outperforming. The recent earnings announcement has send the stock soaring over 30% although unwinding a little in previous days, it still appears although shopify is on the right track after a prolonged period of net income losses.
DCF valuations are unsupportive of further upside as per DCF we are already overvalued however, Shopify remains as a top pick for us given the online landscape, the surge in e-commerce and the rapid increases in user base, GMV and net income.
Technically
We have seen the relative strength divergence develop whilst in a low volume range prior to this recent breakout. The market has began to develop higher swing highs and lows once again with MACD showing strong bullish momentum.
Strategy
Hold or add core long positions until $80 first target for intermediate term targets.
Long term (2yrs+) - we remain bullish until further announcements as Shopify puts its foot down as an industry leader
Downside risk - for leveraged positions a break down of the first swing low around $40 would send a strong bearish message or more aggressively a break through the gap of $48
Comments