Top Gainers Today @ 10am
Public Company CEOs on Twitter
Outside of boilerplate updates on how a company is doing, public company CEOs should stay off of Twitter. Twitter is a megaphone to say stupid things and hurt your investors and company. We have seen $SHOP CEO complain about the share price performance as the company's fundamentals have deteriorated instead of fixing the problems.
$RICK CEO today tweeted something completely absurd today. I understand that the only thing that matters in the long term is free cash flow, but how can you trust an unhinged cannon like this to produce free cash flow? If you're an analyst, how can you explain to your PM to trust this guy with your money? If you're a PM, how do you explain his actions to clients and potential clients? It does not matter what the fundamentals or business outlook look like, I would avoid a CEO like this at all costs.
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Gotta say, I had no idea what $RICK was. Look it up and see it's a gentleman's club and feel like it makes sense now haha. But to answer your question, I agree that I wouldn't invest in a company tweeting stuff like that. Maybe he is trying to be Musk?
Top Losers Today @ 11am
Top Losers Today @ 11am: $SHOP, $TEAM, $SE, $DDOG, $DASH, $EXPE, $ZS, $NU, $NET, $TWLO, $MDB, $OKTA, $COIN, $XP, $BILL, $HOOD, $TREX, $RNG, $S, $SAIA, $CFLT, $FRGE, $ESTC, $DLO, $SMAR, $MNDY, $BROS, $PAGS, $GDRX, $NEWR, $AZEK, $AAON, $NKLA, $VCSA, $SPT, $CRCT, $CIXX, $WEBR
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Shopify's Acquisition of Deliverr
$SHOP, whose share price has fallen nearly 77% since the start of 2022, is an intriguing buy for me due to how they are positioned in such a competitive e-commerce market.
It is projected that by the end of this year, retail e-commerce sales will account for almost 15% of total sales in global retail. Although the pandemic is fading, customers are now even more used to shopping online, and their habits won’t change in the near future. $SHOP can continue to benefit from how their consumer base grew during COVID-19, and also the fact that many merchants hopped on their platform as well.
$SHOP’s $2.1B acquisition of Deliverr shows their intent to expand. This acquisition of this tech-driven service will give $SHOP access to a leading logistics network that will allow them to build a much smoother delivery service. $SHOP believes this acquisition is crucial as it will help merchants logistically during these times of adaptation.
Ultimately, this acquisition aligns with $SHOP’s focus on fulfillment network, which focuses on a smooth and easy delivery and return process for businesses, who should be able to put their resources into their products rather than the logistics of delivering their goods. As companies ship their inventory to $SHOP who will then process the orders on their own, Deliverr will help accomplish this in a quicker and easier fashion.
Shopify Proxy Vote
Anyone else get a personal call to make sure they got the materials for the $SHOP proxy vote on July 7th?
I mean, I have a fair number of shares, but I didn't think I owned enough to warrant a personal phone call.
I guess it's just me & Tobi deciding the fate of the company! 🤣
Seriously just caught me a bit off guard. I've gotten plenty of materials in the mail and email, but never a phone call.
Btw, they are voting to split the stock 10-1; maybe a trade there for some of you degenerates! 😊
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Dang! I hope I wasn't really the only one who got a call or I just doxed myself to the PR guy... 😅
6 Additions for This Week
Through my regular dollar-cost averaging in my $HOOD account on Monday and my Stash account Thursday, I added to the following stocks: $TTD, $SHOP, $MELI, $U, $UPST, and $SE.
These may be my single highest conviction stocks and make up a portion of my core 34 holdings.
Trade Desk will benefit from the steady shift to connected TV, alongside $ROKU.
Shopify, MercadoLibre, and Sea are fascinating at these prices and offer increasingly strong optionality as time goes on, it seems -- not to mention they dominate their niches already.
Unity faced a significant issue regarding its advertising, but it appears to be a one-off event. I cannot like this company's optionality more.
Upstart's sell-off completely confuses me. While risks remain, the risk/reward potential for the company has become far too interesting.
These are six great businesses with high growth optionality for the long term, now trading at significant discounts.
I am also planning to add to one of my "higher-risk" core holdings Monday -- who would you all pick?
Which riskier stock should I buy Monday?
25 VotesPoll ended on: 05/16/22
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TA Lesson Of The Week: Bullish Engulfing
A bullish engulfing is often a sign of a short term trend reversal. If you see a bullish engulfing with higher than average volume, that gives more confluence to the trend reversal.
These trend reversals sometimes lead to just a day or two of green followed by more downside or can lead to a few weeks of green.
All of these stocks are in steady downtrends which means stay patient on your long entries, but they are ones to watch tomorrow for continued strength.
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Love the visual here— if you had a position in Twilio, Shopify, Unity or Fiver, would you be leaning towards a day or two of green followed by more downside, or a few weeks of green, and what would you look at to try and help you determine this?
Curiosity only— not financial advice of course. Always an important reminder, but especially when the market is so unforgiving right now.
Right now the total market capitalization for $MELI, $SE, $CPNG, $SHOP, $ETSY and $GLBE is about $135 billion.
These are the dominant forces in their respective geographies and niches.
Furthermore, depending on the valuation you'd like to give to $AMZN's AWS segment, its e-commerce operations look very cheap now (if not damn near free).
Now compare this $135B and whatever Amazon's e-commerce operations are worth with global retail e-commerce figures expected to reach $7 trillion by 2025.
This is an apples to oranges comparison, and many other companies are involved -- but this difference feels too large not to at least acknowledge.
One year ago, Sea was worth $180 billion alone.
Now, this whole group is $135 billion.
The risk/reward has become fascinating across these stocks -- Amazon included.
And all of this comes with no mention of each company's optionality -- most of which are still relatively nascent.
Call me a sucker for roughed-up growth stocks, but I will gladly keep adding.
Of these seven stocks, how many will be multibaggers by 2030?
41 VotesPoll ended on: 05/14/22
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I’m not a fan of Etsy because as many times as I’ve shopped there, I’ve never once purchased anything. Not sure how they can outcompete anyone. EBay gets my money every time, the Etsy sellers had limitations on payment (only PayPal), higher prices, shipping costs, etc. Mot familiar with $CPNG or $GLBE but even as a value investor have been looking at the other 4 mentioned.
New Post About $SHOP
Shopify is a company I’ve been following for a while, though I recently bought a share. I always learned a lot reading Shopify’s ERs and call transcripts.
It helped me put in context many different features companies such as MercadoLibre and Stone were launching in LatAm.
Perhaps, what is funny is that I’m using a lot of knowledge from Meli and Stone to understand what Shopify is pursuing to build.
I expect to share with readers what is occurring internally with Shopify and how the company is changing its business over time.
First, I’d like to acknowledge that communication deteriorated a lot. I don’t want to use this space to criticize Tobi, so, in short, I left my opinion on Twitter in reply to @jerrycap.
Second, the core business is preserved. I don’t understand why a deceleration in GMV growth is surprising. As we’ll see, GMV growth has been decelerating since 2017.
The Covid-19 outbreak was an extraordinary opportunity for Shopify to advance years in months, but growth would decelerate eventually.
Because of the Covid-19 outbreak, Shopify had to bring upfront a lot of different initiatives that, perhaps, the company was holding for a moment while the business was matured.
The consequence is that Shopify’s capital structure will change over time. Even though that is not bad for the business, all multiples previously used to value the company are worthless.
For instance, how would you compare Shopify’s sales multiple to Emerging SaaS providers if margins are different? Also, the gross profit multiple is worthless since most of Capex is expensed, so the operating margin is also different.
So, until investors find this new “multiple ranges” to sustain trading prices, the stock should be much more volatile.
We believe the first fundamental transformation came when Shopify transformed from essentially being perceived as what's like an online store builder into being more of an omnichannel back-end platform.
In our opinion, Shopify’s core business is offering the back-end engine behind your business in every aspect of your business.
After implementing omnichannel integrations, some merchants don't even have an online website. Still, they might be utilizing Shopify as a point of sale system (“POS”), for example, and they're just selling purely retail or brick-and-mortar (“B&M”).
Other merchants might only be selling purely through Instagram Marketplace, and they're using Shopify for inventory synchronization and order management.
Shopify has already moved from version 1.0 to 2.0. The company isn’t perceived as this front-end-focused platform, where it's a theme designer or an online website designer.
Shopify 2.0 has a holistic back-end tool for any business to manage every aspect of their commerce business, whether online or offline, across all platforms.
In the past years, in our opinion, probably the most significant milestones were the sales channel SDK and the checkout API. They said to customers, “look, we’re agnostic about where you’re selling your product.”
Obviously, Shopify has always had its own App Store regarding a third-party App Store that developers can build on their APIs and publish applications. But it was only in the past couple of years that the company started to be perceived as agnostic.
Also, the company has been doing a good job capturing low-hanging fruits quickly in initiatives such as Shopify Capital, where Shopify offers an automated loan system personalized on each seller’s business performance.
Then, obviously, have Shopify Balance (debit card), which is such a compelling offer if you rely on marketing your brand on Facebook or Google.
### The next leg…
In our view, Shopify 3.0 is marketed by high-touch products, such as Shopify Fulfillment Network, and is more aggressive on the POS roll-out.
Just as MercadoLibre in LatAm, we believe that Shopify is taking a bit more of an intentional approach with how they can expand their ecosystem from a first-party standpoint as opposed to just a third-party viewpoint.
Even though investors are worried about the business model, we understand the recent moves as a huge de-risk for its business.
For instance, MercadoLibre is perceived as a marketplace business, even though its Fintech ops became increasingly relevant to the company and today is more significant than the marketplace itself.
We believe Shopify is setting the ground and indicating to the market where they’re heading in the next 10 years. We get particularly excited about owning the payment processing experience.
Based on our experience following Meli for years, we believe that Shop Pay is the most significant catalyst for growth. Everything else around it powers that specific part of the ecosystem as a network effect.
For instance, the partnership between Shopify and Stripe. Essentially white labeling Stripe as Shopify payments has put them in an incredibly advantageous position.
They can capture a lot of the value upfront whenever a merchant utilizes Shopify Payments as a payment gateway.
Shopify 3.0 will benefit from merchants’ growth, even though they might not be using Shopify’s front-end. As for Meli, we believe Shopify will benefit dramatically from sunk cost.
### Too Soon For Conclusions
When we think about Shopify’s competitive landscape, most people remember BigCommerce, Magento, WooCommerce, Squarespace, Demnadware, VTEX, etc.
We believe all these players definitely have their unique way of marketing and definitely unique way of products they offer.
The more significant thing about Shopify is it's basically an integration/app integration-based platform. So basically, it gives you the platform for anything to get to anything and everything.
Even though Shopify does portray itself as a small business e-commerce platform, it's got a Shopify Plus version to it, technically targeting the business's enterprise side.
B&M merchants learned this lesson two years ago when they were forced to close their doors almost overnight. As a result, tens of thousands of physical retailers pivoted quickly and moved online using Shopify.
Everyone from mom-and-pops to merchants with significant operations and considerable existing sales came fully online with Shopify, which, at the time, was the only sales channel that mattered.
Now that physical retail is reopening and retail, in general, is rebalancing, this more significant position Shopify has earned merchants represents a huge opportunity.
The hundreds of thousands of businesses that shifted to Shopify during the pandemic stayed with them since they can now take advantage of their robust retail POS offering for a unified view of their sales online and offline.
Shopify has been developing a POS retail software for years, and it's now at the point where all merchants who came to Shopify during the pandemic can leverage it.
As mentioned by the management in the 4Q21, the company is growing the sales team and marketing support to help ensure that any merchant doing in-person selling on Shopify knows how much stronger the Shopify POS value proposition is (the reviews are actually fantastic).
Probably this is the first significant change in Shopify’s capital allocation that worries investors. The acquiring business is highly competitive, as we comment in previous posts.
To summarize, it’s a distribution business, which the company has to hire a robust sales team and be willing to operate under cash burn for a couple of years, at least.
We wrote explicitly about Stone a couple of times. Still, there are significant products the company is trying to develop that Shopify already owns, such as the lending and balance features.
Even though we have an estimate about the CAC for merchants, we’re not sharing it now because we still don’t understand what sort of scale or markets Shopify will explore.
However, according to our conservative estimates, we believe the business could generate an incremental 50bps over Shopify’s TPV, which should outpace the GMV due to the TPV-off platform growth.
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Nice. This is when I usually get into growth companies. After they become profitable, growth slows to 20%-40%, growth investor’s abandon, stock drops 75%, I buy a great company at 1/3 where it’s been trading for a year or two and avoid the risk of riding the river not knowing where the waterfall would come. But the waterfall always comes with these growth stocks, that’s where I find my opportunities. Just added $SHOP to my on deck watchlist last week.
Love the detailed write up!
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