Q: SHOP has received some so-so analyst ratings recently. Some are buys and some are hold and sell. I know 5i likes SHOP. But if you had to put a bad report together on SHOP, what would be the negatives that would result in a poor rating. I guess I'm asking what does one have to worry about specifically with SHOP?
5i Research Answer:
If we had to put together a steelman argument for why SHOP can decline, or why its value could be lower than today, we would say: high customer churn in recessions can erode its top-line and bottom-line, its customer base, its dependence on small and medium sized businesses can be negatively impacted by tariffs, it trades at a high valuation of 57X forward earnings, it is seeing increasing competition from Aamzon, Wix, and other names. It has also seen some execution missteps and restructuring complications in the past.