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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: What are your thoughts on comments around SHOP never becoming profitable enough to justify its crazy valuation. They added 1B in opex while only adding 270M in gross profit. They keep spending more and more money on R&D, new comp plans, to compete with Amazon. But mgmt has never given shareholders a plan on when and how they are going to reap the rewards of this hyper growth mode. Like many of these big tech stocks they are following the model of growth at all costs, then eventually we are so big and have so many customers that we increase prices, and cutdown on our costs, then the profits flow in. SHOP has never mentioned a plan for this and Toby isn't exactly the guy thats going to cut pay and let people go for the sake of profits. Starting to wonder if SHOP will ever be a massively profitable company like it was meant to?
Read Answer Asked by Adam on February 21, 2023
Q: hi,
based on several recent responses to subscriber questions, can you let us readers know if you currently have any equities in the growth portfolio that are at risk of losing " a going concern" status? as a long term horizon investor, I am a bit concerned with so many recommendations to sell names in the growth portfolio. I thought the concept was buy low, sell high? if history shows that these smaller (market cap) companies always go way down in economic downturns and/or "recessions", then why not a recommendation when this all started many months ago to sell the small stuff... ?
Read Answer Asked by chris on February 21, 2023
Q: This is an excellent response which shows that 5i clearly understands both companies:

“SHOP is in talks to add AMZN's Buy with Prime service. It allows SHOP customers to get Prime benefits, such as fast shipping, free delivery and free returns. End customers will like it, but analysts are worried that it will effectively shift business from SHOP to AMZN. SHOP needs to be careful here. Some are calling it a Trojan Horse that could backfire on the company. Most SHOP merchants use SHOP because they don't want AMZN controlling the customer relationship. Thus, SHOP needs to maintain the customer relationships it has, and this is likely why it is taking its time with this decision.”

My next question: Amzn targets each individual customer and the customer buys straight from Amzn without needing to go through a merchant store. Amzn fulfillment/shipping/delivery is a huge competitive advantage. Shop on the other hand targets the merchant stores and gives them the tools to sell online directly to the individual customers. Individual customers want goods delivered quickly with option to return. If shop is using Amzn shipping then Amzn will be a part of the shop experience and Amzn will potentially control aspects of the customer experience at shop. What will then stop Amzn from completely absorbing shop within Amzn? Amzn will already be an integral part of shop so is the monopoly power and competition regularly approvals the only thing that would hold Amzn back from taking shop over on day???
Read Answer Asked by James on February 21, 2023
Q: shop web call was a good primer for understanding its business and pointed to setting things up for growth but market and analysts are skeptical.
shop gave back a good chunk of its recent positive movement today. most analysts now have it as a hold which is as close to reduce as you can get without saying sell, with target prices close to what it is now. what does 5i say? where do you see things going short, medium and longer term. can you provide some price ranges. Thinking about topping up position but trying to decide when.
Read Answer Asked on February 17, 2023
Q: Hi, Shopify released excellent results, but stock is taking a 10% hit ( after 7% run up yesterday) in pre-market due to softer guidance. Will see how stock trades today and over next 2/3 days. Most analysts, this morning have been lukewarm to results, except RBC, which raised its price target.

What are your thoughts ? Do you think the market reaction seems a bit too harsh?

Thanks
Read Answer Asked by rajeev on February 16, 2023
Q: Looking for two or three of your favourite industrial companies as I’m low in this sector.
Looking for good management, good valuation compared to peers, a dividend, and hopefully some growth. Please rank best 1st. For 5+ year hold. Thanks
Read Answer Asked by Brad on February 16, 2023
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