Q: Hi Team,
What are your thoughts on the company's current valuation and it's future prospects?
Do you believe this could be a long term compounder? Would you be comfortable buying it here?
Thanks,
What are your thoughts on the company's current valuation and it's future prospects?
Do you believe this could be a long term compounder? Would you be comfortable buying it here?
Thanks,
5i Research Answer:
SHOP is trading at 11.1x Forward Price/Sales. It is not cheap, but the valuation has come down to a more reasonable range for a high-quality name. The company is at the tipping point of being profitable. Stock-based compensation has been under control recently along with a healthy growth rate in its operating cash flows. SHOP seems to be on track to become a compounder again. Based on consensus estimates, it is expected to grow its revenue by more than 20% over the next few years. We think it is at a good price to add some here, but not too aggressively. We would be nimble to add to SHOP over time when opportunities present themselves.