https://www.economist.com/business/2019/08/31/shopify-and-th...For a class of businessman that has been out of fashion for hundreds of years, the word merchant still has a ring to it. It conjures up medieval Europe, with its mercers, skinners, haberdashers, guilds and gold-buttoned liveries. It brings to mind ambitious venturers, bankrolling crusades and conquests, opening up spice routes and making history—for good and ill. It runs through literature and art, from Chaucer to Shakespeare to Holbein. Then it practically vanishes, first under the iron wheels of industrialisation in the 19th century, then crushed by consumer culture in the 20th. Until recently, the few merchants left sold only grain—or doom. Then came the e-commerce era. At last, merchants are staging a comeback.Many of today’s e-merchants sell in a digital marketplace, akin to a medieval town square. That mostly means Amazon, which handles almost half of American online sales on behalf of 1.9m suppliers. Its reputation for providing support to sellers is iffy. But it compensates by offering them an endless stream of customers, including 100m Prime subscribers who buy frequently and enjoy free, speedy delivery. That persuades sellers to put up with a lot.
Was just doing some FA work on SHOP this morning. But no coffee cuz my water heater sprung a leak last night and had to turn off water supply. Anyway...Shopify has had an incredible run, but with that run, the price is incredibly high now valued around 33x P/S. I don’t know how long they can keep that up, but I presume it has to come back to earth at some point. It’s a real conundrum for me. I believe the company will do wonderfully and be much larger than they are today, but there has got to be some multiple compression along the way. It is currently around a 16% position. AJ
I do not own SHOP currently but I'm watching. The thing that I think would hold them back would be Amazon. I just don't see Amazon letting them get away with taking market share away for long if the market it really that large. Many people don't seem to know about the contractor shipping business that Amazon has gotten into. For $10,000 bucks you can start your own shipping business for Amazon. It's up and running in full force where I live. I just don't see how SHOP is going to compete with that on a large scale.Peace,Dana
I should have added that I do own AMZN shares.Peace,Dana
In some respects SHOP has a different business model than AMZN because it lets clients interact directly with customers rather than serving as a middleman. I hadn't realized that until I read this article: https://stratechery.com/2019/shopify-and-the-power-of-platfo.... If SHOP can quickly build out it fulfillment network, there's a possibility it could actually win some customers who don't need AMZN's built in traffic.That's not to say you should run out and buy SHOP. It's just food for thought on an area of differentiation between the two companies.
No middle man but they offer Salesforce and I believe Zendesk services. So really they are just passing the buck so to speak. I just think Amazon may have more value for users. It's very difficult to say at this point because Shopify losses are getting bigger which can be typical for a growing company but it makes it harder to see how they are really doing and if they know what they are doing. Too many "ifs" for me.Peace,Dana
Amazon creates a lot of conflict with its sellers but gives them the eyeballs to make up for it. For a seller wanting to go it alone, Shopify provides a much more attractive service especially if they can crack into the two day delivery segment. Shopify can provide tremendous value for sellers, but the sellers then need to create demand and that is something Shopify really doesn’t help. Very richly valued though. Shopify has not, however, had increasing losses. At least not on a non-GAAP basis. AJ
I was looking at net income getting increasingly deeper in red. So spending more than they are taking in. Peace,Dana
That is on a GAAP basis that penalizes the company for SBC. The past 3 quarters adjusted net income has risen nicely, but the company is likely tryin to minimize profits in order to maximize investments that will drive future growth. AJ
Ok, I getcha now. Next earnings and earnings reaction is what I'm waiting for. Or actually maybe a couple more earnings. Then I'd feel more comfortable.Peace,Dana
Dana et al,Good article on the differences between SHOP and AMZN. https://business.financialpost.com/technology/inside-amazon-...AJ
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