CA - Shopify: Valuation Does Not Match Fundamentals

2024-06-28 10:01:40 ET

Summary

• Shopify's fundamentals are quite strong, with impressive revenue growth, operating leverage, and a fortress balance sheet.
• However, even considering all the company's fundamental strengths and growth potential, the current valuation is too generous, with a 44% premium over the fair value.
• Moreover, Wall Street analysts' sentiment regarding the upcoming Q2 earnings release is quite bearish, with more than twenty downward EPS revisions.

Investment thesis

My previous cautious thesis about Shopify ( SHOP ) aged well, as the stock is significantly underperforming compared to the broader market since November 2023. More than six months passed since my previous coverage and today I want to share my updated analysis of Shopify. ...

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