| > They are rapidly becoming the next FAANG. Shopify isn't remotely close to joining the big tech club, outside of their comically inflated bubble valuation (trading for 56 times sales). Let's compare, trailing four quarters. Amazon, $296b sales, $14b operating income Apple, $268b sales, $65b operating income Alphabet, $166b sales, $35b operating income Microsoft, $138b sales, $52b operating income Facebook, $73b sales, $26b operating income Netflix, $21b sales, $3b operating income Shopify, $1.7b sales, negative $178m operating income One of these is very much not like the others. Investors think they've found the next Amazon, it's not. It's a slightly better Etsy as a business, and if they're really lucky, in 10 years they might be an eBay. Amazon is only what it is today, thanks to the AWS margins and op profit (not because of its retail business, which has very low growth and terrible margins). There's no evidence of stellar margins hiding in Shopify's business. 14 years, zero profit, and a weak gross profit margin (eBay's gross profit margin is 2x that of Shopify, and was even better in years past; even Etsy has a far better gross profit margin). Compare Square to Shopify to further amplify the obviousness of the context: Square has $5.1b in sales (3x larger, trading for 8 times sales), an operating profit for 2019, still growing fast, and is worth about 2/5 what Shopify is. SHOP's valuation is obviously lunacy, which is quite common in this market at the moment (the Dave Portnoy market). See: Nikola or most any cloud company. It'll end in tears or a decade-long stagnation in the stock, there are no other possibilities. How long will it take SHOP to generate a $3b annual profit? That's the future stagnation clue, their market cap represents a decade or more of returns pulled forward (if everything goes right for them). The only thing qualifying SHOP for consideration among big tech, is their market cap. If we were going to spread the insanity around more evenly, ETSY, adjusting for its slower growth rate relative to SHOP, should have a $25-$30 billion market cap. Every investor generation thinks their bubble is the one that is different and is going to last. |