Shopify Inc. ((SHOP), SELL recommendation, CMP: $42.41) provides cloud-based, multi-channel commerce platform designed for small and medium-sized businesses. The Company's platform provides merchants with a single view of their business and customers across all of their sales channels.
• Valuation o Forward P/E -ve. P/S 11.9, P/B 18.4, P/CF 296.9 o No debt
• Recently, the Company introduced Apple and Android apps for easy and secure funds transactions
• The Company has two revenue streams such as subscription solutions (revenue through sale of subscriptions: 50.4%) and merchant solutions (payment processing fees, transaction fees etc.: 46.8%). Further, merchant solutions’ revenue (+120.7%, y-o-y) is growing at faster rate than subscription solutions’ revenue (71.5% y-o-y). However, cost of merchant solutions (120.2% y-o-y) is also growing faster than cost of subscription solutions (67.8% y-o-y). This lead to lower gross profit margin
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However, gross profit increased by 20.9 million, of 82.8% to $46 million from $25 million
• Operating margin decreased to 33.9% in 2Q16 from 35.8% in 2Q15
• The Company expect full year 2016 revenue target of $361 million to $367 million
• Competitors: This Company has ample competitors such as Bigcommerce, Volusion, Commerce, Magento, Worldpress, Prostores, Prestashop, GoDaddy, Yahoo Stores, Bigcartel, Hostgator, Drupal Ecommerce, Joomla Ecommerce, Amazon Webstore, Business catalyst, Photoshelter, Zencart. Therefore, I believe this high completion should reduce the Company’s price bargain