Shopify (SHOP) ๐Ÿ›’ - Share Chat

Must read the fine print

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Shopify were down 8+% yesterday. The only real news being Amazon launching โ€œbuy with primeโ€ on third party sites.

The stock is down over 60% YTD, and its PE ratio is back down to ~20. Which feels pretty cheap for a growing tech company.

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-42% past month, awful :frowning:

Ok, so my Shopify shares are down 60%.

So now would be a good time to reassess my investment.

Shopify is not just a website builder and shopping cart

  1. Because your site runs on their system, they effectively provide site security and maintenance updates too โ€“ this ranges from day-to-day maintenance to whole system re-writes of their code. This is an expensive undertaking but is effectively included in the price.
  2. Because your site runs on their system you also by default get data backup provided by them. You also effectively get free data insurance too โ€“ if your site is hacked and data stolen Shopify will carry the can and potential fines.
  3. PCI compliance, and updates relating to the Payment Services Directive (PSD2) are all handled by them. If you have your own server, you have to do all of this yourself.
  4. Digital certificates, they handle the application and renewal process โ€“ saving time and probably money too.
  5. Domain name registration and renewal. The renewal process is particularly important.
  6. Some people will complain that their platform restricts what you can do and that a dedicated server is better. However, from experience you spend a few days locking down your dedicated server to close all the potential security holes โ€“ again time and money.
  7. A dedicated server with all the trimmings is approximately $800 - $1400 per month. This will get you technical support for the server and backups, but no support for what runs on it. Everything else is down to you.
  8. The other advantage of Shopify is the network benefit. If as a customer, you buy from a website run on Shopify you input your details (name, address, mobile number) as usual. However, the next time you use another site running Shopify you will be recognised. Shopify then sends a 4-digit pin to your mobile, enter that on the site and all your details are automatically filled in, (except your card). As more sites use Shopify more sites and customers will benefit from this feature.
  9. Once your site is up and running on Shopify you will be probably be staying as the cost of moving is too great. This means that Shopify will be able to increase their prices and margin as their customer base is effectively locked-in. This is useful with inflation currently around 6-8%.

Shopify are now building their physical infrastructure and fulfilment, so that they can hold more customer stock and offer faster delivery options. This is a recognition that they have to catch up with Amazon who spent a decade or more doing this. This will also allow their customers to have sites across the world in local languages and at some point, with local fulfilment.

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To balance all that look at earnings, guidance and note the fourth last paragraph quoting the CFRA analyst in the following article:

Then there is the matter of competition as some people above have alluded to.

True, but I think they were always going to have a hard time competing against last year. I would not be interested if Shopify did not intend to invest heavily over the next few years. I think it depends on timeline. They have already stated that investors should expect more of the same for the next two years. My timeline for any investment is 5-10 years.

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A helpful past 2 days at least for shareholdersโ€ฆ.

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