|Bid||329.10 x 900|
|Ask||0.00 x 3200|
|Day's Range||328.60 - 338.96|
|52 Week Range||117.64 - 340.84|
|Beta (3Y Monthly)||1.36|
|PE Ratio (TTM)||N/A|
|Earnings Date||Apr 30, 2018 - May 4, 2018|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||320.84|
Given unusual buy signals alongside huge growth for e-commerce companies, Shopify stock could be set up for additional gains.
(Bloomberg) -- Same-day shipping is becoming the norm for online shoppers but for smaller merchants it can be a logistical nightmare. That’s where Shopify Inc. can step in, says Ric Kostick, chief executive officer of 100% PURE.The natural skincare company ships up to 5,000 orders a day from its own warehouse in San Jose, California. That works fine for customers on the West Coast but it can take up to a week to get its bamboo blur powder and coconut shower gel to the rest of the U.S. The company contemplated setting up an East Coast warehouse but the prospect was technically daunting.“The hardest thing is programming the technology to route the packages the right way and route the orders based on what a customer orders and what inventory is available at each site. Shopify has built the technology to calculate this,” says Kostick, who co-founded 100% PURE in 2004. “This is something I’ve wanted for years.”When Shopify said last month that it was moving into the fulfillment business -- essentially charging online merchants to store and ship their products -- the shares spiked and analysts began talking about the Canadian upstart as a potential competitor to Amazon.com Inc.It’s unlikely to become a serious threat to Amazon at this point. But many analysts believe the Ottawa-based company’s decision to add logistics to its range of online services is smart because it could help keep customers loyal, fend off competition and create an additional source of revenue. The move also could potentially pry small merchants from Amazon, which is focusing more on mega brands like Procter & Gamble Co.“A merchant is doing tens of millions of dollars in revenue but their fulfillment is a complete mess and that could prevent them from being successful,” says Taylor Sicard, a former Shopify employee who now runs a company that helps merchants set up e-commerce businesses. “It is a massive opportunity for Shopify.”Founded in 2006, Shopify had a simple pitch: pay us $29 a month and we’ll give you all the tools required to start an online business. Many Shopify customers fail, but the more successful they are, the more money Shopify makes through transaction fees and higher-priced subscription tiers. Its Shopify Plus premium service, which counts Kylie Jenner, The New York Times and 100% PURE as its customers, can cost at least $2,000 per month.Investors love the model. Shopify shares have soared more than 1,800% since the company went public in May 2015, making it one of Canada’s most successful startups. The stock has been hitting records almost daily and now has a market value of C$48.73 billion ($37 billion), bigger than two the country’s oldest financial heavyweights, Manulife Financial Corp. and Canadian Imperial Bank of Commerce.But Shopify has struggled to make a profit and is poised to report a net loss of $35 million on sales of $320 million for the second quarter on Aug. 1, according to the average of analyst estimates compiled by Bloomberg.As the company matures, meanwhile, it will be harder to sustain the average 74% year-over-year revenue growth rates it has managed over the past three years. There are also concerns that Shopify relies too heavily on a few, large merchants that use its premium services. Most of the company’s customers, which amounted to over 820,000 as of June, are smaller and tend to flame out on a regular basis, creating considerable churn.That’s where the fulfillment service comes in. The company has pledged to negotiate low rates with warehouses and shipping companies, then pass those savings on to its customers. In the future, Shopify could pool shipments from different merchants together, making shipping faster and cheaper and gaining some of the same advantages Amazon gets from its centralized fulfillment network.Initial PhaseIt’s partnered with logistics firms to offer the service to merchants shipping orders of 10 to 10,000 items in seven warehouses in states including Nevada, California, and Texas in the initial phase.“Right now it is really important that we invest in the right growth opportunities for the future and not necessarily take our foot off the gas,” says Harley Finkelstein, Shopify’s chief operating officer.Many merchants prefer using Shopify because they can create a brand on their own website, rather than being subsumed into an Amazon-style marketplace. The new fulfillment service will also let them slap their brand on the shipping cartons, something some fulfillment companies don’t offer.Kostick, who also sells his products on Amazon and uses its fulfillment network says the U.S. company provides access to one of the fastest-growing distribution channels for beauty products in the U.S., but Shopify offers more control.“You can customize your own website however you want,” he says. “Basically, you’re empowered.”Jennifer Harper, who also sells sustainable cosmetics through Shopify, says she will wait until Shopify sorts out any kinks before trying the fulfillment service. Others say it could be difficult and expensive to get out of existing contracts with standalone services in the short term.Happy MerchantsShopify says it could eventually build its own warehouses. While Shopify’s finance chief, Amy Shapero, has said that the company will be able to offset the cost with fees for the new service, some analysts say revenue will be limited at first because Shopify will need to offer discounts to lure merchants.Amazon may have little to fear from Canada’s most valuable tech company at this point. Still, Shopify offers a serious alternative to the Seattle leviathan.“Amazon is all about trying to satisfy the customer,” says Anurag Rana, a senior analyst at Bloomberg Intelligence. “They do whatever they can in their power to squeeze money out of the merchants to give it to customers. Shopify is the exact opposite. They will do whatever it takes to help the merchant and maximize their profit.”(Updates with share price and market cap in seventh paragraph)To contact the reporter on this story: Simran Jagdev in Toronto at firstname.lastname@example.orgTo contact the editors responsible for this story: Jacqueline Thorpe at email@example.com, ;Jillian Ward at firstname.lastname@example.org, Robin AjelloFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Given its need to grow profits every year, Facebook (NASDAQ:FB) has pushed bravely into the world of cryptocurrencies with Libra, a stablecoin many analysts believe could empower billions of people who don't use traditional financial services. This could help provide FB with a new stream of cash flow that would diversify it from the ad market. Source: Shutterstock InvestorPlace - Stock Market News, Stock Advice & Trading TipsInitially met with great fanfare, it seems that Libra is more trouble than it's worth. Governments around the world have expressed reservations about it, complaining that the stablecoin could impact the stability of the global financial system without proper regulation. Even Congress has expressed reservations, asking for more information on how Facebook will handle the privacy and national security concerns that might arise. Though additional revenue and cash flow are always nice, government scrutiny and the subsequent potential regulations could cost Facebook more than it makes from Libra. * 10 Stocks to Buy From This Superstar Fund Fortunately for investors of the social network, Facebook has numerous other ways of making money off its 2.7 billion users. Here are three ways FB stock could surge without drawing too much ire from regulators. FB Gain Market Share in E-commerceAlthough Facebook Marketplace hasn't done as well as some bulls expected, Mark Zuckerberg isn't giving up. According to the Verge, Facebook's Instagram division is working on a standalone app designed solely for shopping. Instagram has tens of millions of businesses that have Instagram accounts, and around 80% of Instagram users already follow at least one business. By connecting users to businesses and potentially providing tools for merchants, Facebook could challenge Shopify (NYSE:SHOP) and even Amazon (NASDAQ:AMZN). Facebook Gain Market Share in StreamingAccording to Forbes, over half a billion people watch video on Facebook every day. If Facebook provides premium content alongside the free user-generated content, Facebook stock could potentially reap big benefits. In terms of its premium video strategy, Facebook seems to have prioritized sports broadcasts that foster connectivity and build communities. Internationally, the company bid unsuccessfully for streaming rights for Indian Premier League cricket, but was successful in gaining the streaming rights to the Spainish La Liga soccer league. In the United States, Facebook has shown some MLB games. Given its actions in recent years, it seems that Facebook is dipping its toes into the water and trying to see what connects with its audience profitably and what doesn't. Once the company figures out the right live broadcast strategy, look for streaming to make a bigger difference in Facebook's bottom line. FB Makes Hit Product in Virtual or Augmented RealityAlthough Facebook bought Oculus five years ago for $2 billion in hopes of capturing a big market, FB has failed to make a blockbuster product in the category. Cash flow generated from Oculus hasn't made much of a difference in Facebook's overall performance. Yet the potential is still there. Virtual reality and augmented reality glasses certainly have the potential to be big. Given its nearly unrivaled ability to market to people and its world class workforce, Facebook could one day make the iPhone of virtual reality or augmented reality. Needless to say, this would be good for Facebook stock. FB Isn't Dependent on LibraAlthough Libra might not contribute as much as previously hoped due to government resistance, Facebook has plenty of other ways of making money from its billions of users. Facebook's e-commerce, video streaming, and VR/AR hardware efforts could help the company grow its profits and be beneficial to FB stock in the future.As of this writing, Jay Yao did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Buy From This Superstar Fund * 7 Stocks to Buy This Summer Earnings Season * 7 Marijuana Penny Stocks to Consider for Those Who Can Handle Risk The post FB Stock Could Surge If It Does These 3 ThingsÂ appeared first on InvestorPlace.
Most mutual funds that invest in small-cap stocks tend to close to new investors as soon as the assets get to a point where it becomes harder to outperform the benchmark. It's not often you find a portfolio manager that invests $3.9 billion in small-cap stocks and delivers market-beating performance, but that's what you get with Amy Zhang, who has run the Alger Small Cap Focus Fund (MUTF:AOFAX) since 2015. Zhang's performance is off the charts in 2019, up almost 32% year to date through July 22, nearly 10 percentage points higher than the Russell 2000 Growth Index, the fund's benchmark.InvestorPlace - Stock Market News, Stock Advice & Trading TipsZhang uses a focused approach keeping her portfolio to 49 holdings, much less than the 1,239 in the benchmark. The median market cap is $3.67 billion; Zhang's looking for stocks to buy that can become mid-cap stocks. * 7 Defense Stocks to Buy to Fortify Your Portfolio Here are 10 of the stocks Zhang currently holds that you might want to put on your watchlist. Small-Cap Stocks to Buy: Canada Goose (GOOS)The third-largest holding in AOFAX, Canada Goose (NYSE:GOOS) accounts for 3.15% of the portfolio. It's down almost 6% year to date. If you don't know about Canada Goose's parkas and other outdoor wear, you have likely spent the past couple of years living very close to the Equator where down jackets aren't necessary. I picked GOOS as my pick in InvestorPlace's top stock picks of 2019. I'm currently in 8th place, well back of Louis Navellier, whose Lululemon (NASDAQ:LULU) pick was a timely one. The apparel brand continues to make all the right moves. As for Canada Goose, its shares got clipped at the end of May when its earnings missed analyst expectations and it gave a conservative outlook for the remainder of the year. CEO Dani Reiss is building the perfect three-legged stool of brick-and-mortar, wholesale, and e-commerce. This focus will drive its stock higher in the long haul. In the meantime, investors should expect lots of volatility. GOOS and Lululemon are two of Canada's greatest exports in recent years. Five Below (FIVE)The fourth-largest holding in AOFAX, Five Below (NASDAQ:FIVE) accounts for 3.14% of the portfolio. It's up 25.7% year to date.I originally recommended the discount chain's stock in April 2017 when it was trading at $44, well below its current levels. I like its concept of selling products for $5 or less with a big focus on teens and pre-teens. It plans to open 2,000 stores over the next few years. Morgan Stanley analyst Simeon Gutman recently resumed coverage of Five Below giving it an "overweight" rating and a $135 target price. The analyst sees FIVE generating significant free cash flow by the end of 2020 and beyond. * 10 Tech Stocks That Are Still Worth Your Time (And Money) The best part: for every store it opens, it gets all of its investment back in less than a year, making it an excellent candidate based on return on capital invested. Shopify (SHOP)Source: Shutterstock The sixth-largest holding in AOFAX, Shopify (NYSE:SHOP) accounts for 2.93% of the portfolio. It's up 154% year to date.This is the problem with mutual funds. Because the holdings are listed as of the most recent quarter-end -- April 30 for AOFAX -- we have no way of knowing if Zhang has sold any of her holdings. We won't know the latest holdings until it updates the portfolio at some point in August. With the e-commerce platform up by more than double in just seven months, only those committed to holding the Canadian tech phenom for 2-3 years should consider buying at this point. However, make no mistake. Shopify is the real deal.As CNBC on-air personality Jim Cramer recently said, Shopify has the potential to be the next Amazon (NASDAQ:AMZN). It has way too small a market cap ($37.9 billion) given how big it could become. Veeva Systems (VEEV)The eighth-largest holding in AOFAX, Veeva Systems (NYSE:VEEV) accounts for 2.87% of the portfolio. It's up 93% year to date.Veeva helps life sciences companies manage all of their data and content on one platform, making the clinical trial process much more efficient. Given how complicated this process can be, anything that helps scientists and medical practitioners stay on course is a godsend. By buying VEEV stock, you're getting both a tech company and a health care business all wrapped up in one. One way that it's trying to keep growing is by broadening its portfolio of cloud-based products beyond the life sciences vertical into other industries. Using its Vault content management products, which currently account for almost half its revenue, look for it to take what it's learned from life sciences and transfer this knowledge to companies other than healthcare. * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip Last August, I recommended VEEV as one of seven growth stocks to buy. It's up 93% since then with plenty of gas in the tank to get to $200 and beyond. Wingstop (WING)The ninth-largest holding in AOFAX, Wingstop (NASDAQ:WING) accounts for 2.69% of the portfolio. It's up 48% year to date.Restaurant Business's Peter Romeo recently interviewed Wingstop CEO Charlie Morrison about its business. Morrison, who has been CEO for the past seven years, discussed how the company is at an inflection point where technology is required to continue growing its business. Morrison would like to see Wingstop become one of the world's top 10 restaurant brands. Currently, it has annual sales of $1.3 billion; it's the 45th largest company on Technomic's Top 500 Restaurants list. To improve service times, the company is looking to implement small holding stations so that customers can retrieve them without having to deal with an employee. It's small technological advancements like this that will keep it growing. Wingstop has grown same-store sales for 15 consecutive years, doing it in good times and bad. Look for it to expand its delivery business over the next 2-3 years. Chegg (CHGG)The 11th-largest holding in AOFAX, Chegg (NASDAQ:CHGG) accounts for 2.63% of the portfolio. It's up 52.7% year to date.College graduates from 2007 through 2015 are most likely familiar with the company because of its printed textbook division, which rents and sells printed textbooks. However, in recent years, the company has moved toward a digitally-focused business that helps students stay on track through various solutions, including study and tutor programs. Most of these digital services fall under its Chegg Services segment. In Q1 2019, this segment grew revenues by 34% compared to 7% for Required Services, the operating division that provides the printed textbooks.I recently recommended CHGG as one of seven stocks that will make a student's life easier. * 7 Retail Stocks to Buy for the Second Half of 2019 Chegg is expected to make $0.56 a share in 2019 and $0.77 in 2020. With revenue growth of 20% or more for the foreseeable future (not to mention it competes in a desirable market), I could see CHGG stock hitting $100 in the next 12-24 months. nLight (LASR)The 17th-largest holding in AOFAX, nLight (NASDAQ:LASR) accounts for 2.12% of the portfolio. It's down 13.2% year to date.Although I have heard of most of the companies in Zhang's portfolio, I'm unfamiliar with nLight, a company that specializes in the development of high-powered laser technologies for end-user buyers. Serving many different industries in need of lasers that can cut and weld at high speed, nLight continues to grow its business outside North America. Based in Vancouver, Washington, nLight's 2018 revenues were $191 million, 38% higher than a year earlier. According to the company, it competes for a total addressable market of $2 billion, expected to grow to $4 billion by the end of 2020. Over the past four years, the company has grown revenues by more than 30% a year while increasing gross margins from 25% in 2015 to 35% in 2018. With zero debt and $142 million in cash on the balance sheet, LASR is an excellent combination of growth and value. BlackLine (BL)The 19th-largest holding in AOFAX, BlackLine (NASDAQ:BL) accounts for 2.05% of the portfolio. It's up 20% year to date.If you're a corporate accountant, there's a good chance you've heard of BL's cloud-based financial automation software that helps companies keep accurate financial records. Recently, BlackLine's Finance Controls and Automation Platform was named 2019's "Accounting Automation Platform of the Year" by Corporate Vision Magazine. More than 2,700 companies and 227,000 people use BlackLine's platform. The company's customers buy monthly subscriptions with 1-3-year terms. In the quarter ended March 31, its subscription and support revenue was $61.3 million, 26% higher than a year earlier. Not yet profitable, it's got to get to approximately $100 million in quarterly revenues before it turns into the black. Based on current growth rates, that should happen in the next 24-36 months. * 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond Of all the stocks on this list, BL is the one with the most risk at this point in its development. WisdomTree Investments (WETF)The 35th-largest holding in AOFAX, WisdomTree Investments (NASDAQ:WETF) accounts for 1.64% of the portfolio. It's down 4.1% year to date.If you bought one of WisdomTree's ETFs five years ago and also bought its stock, I can almost guarantee you would have done better with the ETF. That's because WisdomTree's stock has had a miserable run over this period, down 6.6% on an annualized basis, including dividends. By comparison, the WisdomTree U.S. SmallCap Fund (NYSEARCA:EES) is up 7.2% over the same period. What is the problem for the ETF provider? Its operating margins are shrinking. In the three months ended March 31, it had an operating margin of 19.9%, 200 basis points lower than at the end of December and 600 basis points lower than a year earlier. However, it's important to remember that a significant amount of its operating expenses in recent quarters is the result of its April 2018 acquisition of ETF Securities' European ETF business, which gave WisdomTree much greater scale in the European market. The largest global independent ETF provider in terms of assets under management, WisdomTree's stock is cheap under $7. HealthEquity (HQY)The 39th-largest holding in AOFAX, HealthEquity (NASDAQ:HQY) accounts for 1.23% of the portfolio. It's up 36% year to date.The Utah-based company specializes in providing HSA's (Health Savings Accounts) for U.S. companies and their employees. It is currently the HSA platform for 141 health plans and 45,000 employers. Founded in 2002, the number of Healthequity's HSA members at the end of April was 4.05 million people, up 17% from a year earlier. It continues to be the go-to company for HSA's. It's a big reason why I recommended the company in November 2017, calling it one of seven stocks to double your money. Despite declining by 15% since its selection, I can see why Zhang has included HQY in her portfolio. HQY recently announced that it would acquire WageWorks (NYSE:WAGE), a leader in administering HSA's for $2 billion. That's a 28% premium on WageWorks' stock based on the 30-day volume-weighted average closing price before the offer becoming public knowledge on April 30. The move accelerates the company's push into the HSA marketplace.At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Defense Stocks to Buy to Fortify Your Portfolio * 10 High-Flying, Overvalued Stocks in Danger of Crashing * 8 Stocks to Buy That Are Growing Faster Than Amazon The post 10 Stocks to Buy From This Superstar Fund appeared first on InvestorPlace.
Shopify stock has been a huge winner in 2019. Shopify earnings are booming and the company plans to compete more with Amazon. But is SHOP stock a buy now?
The U.S. stock market again has moved to an all-time high -- and more than a few investors are worried. Finding stocks to buy is exceedingly tough, with growth names in particular at valuations not seen since the heady days of the dot-com bubble. Stocks to sell, however, are a different story.Of course, valuation concerns have dogged U.S. equities for most of what is now a ten-year bull market. For the most part, stocks have simply climbed the proverbial "wall of worry". And those investors who have seen many growth stocks as "too expensive" in many cases have missed out on huge gains.Even by those standards, however, more than a few stocks have made moves in 2019 that are almost crazy. 31 stocks with a market capitalization over $2 billion already have doubled or better just this year. Many more trade at sales multiples equivalent to earnings multiples for quality companies.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThese 10 stocks, in particular, have serious valuation questions. All ten admittedly have real businesses (even if not all ten are profitable), and real reasons why investors have been so optimistic. But at these prices, it doesn't take much for these overvalued stocks to stumble. * 10 Tech Stocks That Are Still Worth Your Time (And Money) Long-time high-flyer Netflix (NASDAQ:NFLX) proved that point this week, falling 11% after losing U.S. subscribers. One - or more - of these ten stocks could be next. Beyond Meat (BYND)Source: Shutterstock The gains in Beyond Meat (NASDAQ:BYND) have been beyond incredible. The company originally priced its IPO in a range of $19 to $21. That figure was moved to $25. By the end of its first day of trading, BYND stock had gained 163% to $66.It wasn't done. Aided by a big earnings beat, BYND would triple from that first-day close before pulling back. Its upward march has resumed, however: BYND now is up nearly 600% from its IPO price in two and a half months.There is a real opportunity for the company to disrupt the meat market, as Luke Lango argued last month. But valuation is an enormous question mark. The overvalued stock trades at 25x fiscal 2020 EPS estimates. And the obvious concern is that Beyond Meat doesn't have the 'meatless meat' market to itself.Indeed, competition is intensifying. Tyson Foods (NYSE:TSN), which sold its stake in Beyond Meat before the IPO, is entering the market. Nestle (OTCMKTS:NSRGY) is on the way as well. Privately held Impossible Foods already has a solid position. So does Kellogg (NYSE:K), whose Morningstar Farms business already sells plant-based meat substitutes.The optimism toward Beyond Meat's opportunity makes some sense. The fact that it will have to share the opportunity, however, means that 580% gains and a nearly market-leading price-to-sales multiple both look like too much. Shopify (SHOP)Source: Shutterstock Anyone who has called e-commerce platform Shopify (NYSE:SHOP) overvalued has looked silly. I should know: I've done so twice this year, most recently in April with SHOP stock at $206.Of late, I've largely given up fighting the tape. The company's new plan to add fulfillment to its offering opens its addressable market -- and allows investors to model greater growth for longer, potentially keeping SHOP stock at these levels.That said, fundamentally, I'm far from convinced. SHOP stock still trades at something like 25x sales -- like that of BYND, one of the highest multiples in the market. I still believe, as I wrote last year, that the sensitivity of small businesses to a recession makes SHOP more cyclical than investors realize. * 7 Marijuana Stocks With Critical Levels to Watch The valuation here simply seems to incorporate perfection. Perhaps Shopify can deliver, particularly as it moves into fulfillment and starts serving larger clients. But even the best business can stumble and there is no room for anything close to a stumble left in Shopify stock. Zoom Video Communications (ZM)Source: Shutterstock Along with Beyond Meat, Zoom Video Communications (NASDAQ:ZM) has calmed fears about the tech IPO market that followed the weak debuts of Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT). ZM stock hasn't been quite as explosive as BYND, but it's posted big gains, nearly tripling from its $36 IPO price.The gains aren't a surprise. Indeed, I wrote not long after the IPO that Zoom stock was the perfect stock for this market. Growth was impressive, potential huge, and valuation -- even then -- stretched. As I put it at the time, "The point right now is that the numbers can work. And for now, that's all that really matters."With ZM stock nearing $100 again, however, the question is if the numbers can work. Zoom trades at nearly 50x fiscal 2020 revenue. That's 50x sales -- not earnings. The FY21 consensus earnings per estimate is a nickel per share, suggesting a forward P/E multiple nearing 2,000x.Decades -- not years -- of growth are priced into the videoconferencing software company. And maybe that growth is coming. But even in a tech space that looks overheated, ZM's valuation stands alone. And if there is any concern about valuation -- let alone a sell-off like that seen at the end of last year, when Zoom was still private -- there may not be an overvalued stock more likely to fall than ZM. Square (SQ)Source: Shutterstock It might be a bit unfair to put Square (NYSE:SQ) on this list of stocks likely to crash. It's already pulled back; even after touching an eight-month high this month, SQ stock still sits 20% below all-time highs reached back at the beginning of October.Valuation is steep, but in context not that stretched. SQ stock, backing out its cash, trades at less than 70x 2020 consensus EPS estimates. That's not cheap, to be sure, but relative to other growth stocks in this tech market it seems almost reasonable.That said, there are real concerns here. The company's potential move into banking excites some investors, but at this point in the cycle, should be seen as a risk. Competition remains intense. Like Shopify, Square has significant exposure to small businesses (even though it's been successful of late in grabbing larger customers). * 3 Stocks That Look Like Death The worry more broadly is that Square's business model works great now, in a growing economy where its technology is transformative. At some point, the environment will be very different. If investors start focusing on those out-year risks, SQ stock -- which fell 50% in a matter of months last year -- could be in for another big fall. Aphria (APHA)Source: Shutterstock Marijuana producer Aphria (NYSE:APHA), too, might seem an odd choice for this list of overvalued stocks. Most notably, APHA stock already has crashed -- twice. It fell 75% during last year's fourth quarter, and after a huge rally has dropped 40% since early February.But APHA -- and other marijuana stocks -- still could see much more in the way of downside. Even with lower valuations across the sector, the likes of APHA, Canopy Growth (NYSE:CGC), and Cronos Group (NASDAQ:CRON) still trade at nosebleed revenue valuations. Earnings are negative almost entirely across the board.And beyond Canada, it's still not clear from where the next wave of growth comes. U.S. legalization is stalled out until at least 2021 (and likely much longer). Movements toward medical marijuana worldwide are making progress, but recreational legalization is likely to take some time.Cannabis stocks, including APHA, already are drifting down, as investors lose patience. But valuations remain stretched even at these lower prices, and if growth expectations dim, there's a lot further for APHA and its peers to fall. Salesforce.com (CRM)Source: Shutterstock Salesforce.com (NYSE:CRM) could be the granddaddy of this list. Salesforce has been public for 15 years -- and it's looked like a potentially overvalued stock for that entire period. Yet over that stretch, CRM stock has returned a whopping 3,550% -- a stunning 26% average annual return. Investors who focused on valuation, and not the business, missed out on those market-leading gains.In this market, there's not a ton of reason to suggest that CRM can't keep flying. But of late, it does look like investors are starting to focus just a bit more on valuation -- and competition. Most notably, Microsoft (NASDAQ:MSFT) is trying to take share with its Dynamics 365.Meanwhile, Salesforce.com has continued pumping out 20%+ annual growth -- as it has for years -- but CRM stock has stalled somewhat. Indeed, while other software stocks have soared, CRM has traded sideways since the beginning of February.The problem is that CRM stock, even after half a year of flat returns, still isn't cheap -- or close. The stock trades at 46x next year's earnings, which isn't terrible considering its growth. But as I noted earlier this year, some two-thirds of the company's guidance for adjusted net income comes from the exclusion of stock-based compensation. That's a real cost, that dilutes CRM stockholders. Back that out, and a 20-year-old company is trading at something like 140x forward earnings. * 7 Stocks Top Investors Are Buying Now In this market, investors have been happy to ignore stock-based comp. If and when that changes, CRM stock is going to fall. Etsy (ETSY)Source: Shutterstock Etsy (NASDAQ:ETSY) has a great business. It's dominant in the crafting space, having dispatched potential competition from Amazon.com (NASDAQ:AMZN). The company was able to raise seller fees last year, which gave a big boost to revenue, margins, and the ETSY stock price.But at the end of the day, Etsy remains a mostly niche business. Growth in its industry likely is limited. Like Square and Shopify, Etsy may be benefiting from the 'newness' of the platform. Businesses will fade, whether due to a recession or simply an increasing realization that the returns don't match the investment.Even down 11% from early March highs, none of those risks are priced into ETSY stock. It still trades at well over 10x revenue, even backing out its cash, and over 50x next year's EPS on the same basis. And as I wrote in April, even the company's five-year targets suggest upside is limited.To some extent, given the soft performance of ETSY in recent months, investors may be coming to the same conclusion. But if ETSY's valuation gets reset that of a company with a relatively limited market and a potential ceiling on its growth, the soft drift of the last few months could become an accelerating downturn. Lululemon Athletica (LULU)Source: Shutterstock What Lululemon Athletica (NASDAQ:LULU) has accomplished is rather incredible. At a time when retailers -- and particularly apparel retailers -- are getting hammered, Lululemon continues to drive impressive growth. Thanks in part to a Q1 earnings beat, LULU stock has hit all-time highs and might seem to have further to go.But at 34x forward earnings, even backing out net cash, it's not hard to wonder if the rally has run its course. Lululemon isn't going to be immune from the pressures on retail forever. 'Athleisure' is a hot trend at the moment; like all trends, that won't last forever. One only need to look at Gap (NYSE:GPS), whose Athleta nameplate is a minor Lululemon competitor, to see what happens when 'cool' turns 'uncool'. * 3 Food Stocks to Buy for Fast and Big Profits To be sure, that type of shift may not happen at Lululemon to the same extent: the demand from athletes for its clothes likely will persist. But LULU remains priced for years of growth - and it's not hard to see that growth stalling out when the next hot trend comes along. Snap (SNAP)Source: Shutterstock The turnaround at Snap (NYSE:SNAP) clearly has made some progress. User growth is returning. Snap's ability to monetize those users via advertising sales -- particularly outside the U.S. -- is improving dramatically. Several Wall Street analysts have jumped on board as well.As a result, SNAP stock has been one of the year's biggest gainers, rising 171%. But SNAP also has begun pulling back, dropping 10%+ in the last few sessions - and more downside could be ahead.Most notably, SNAP stock's valuation has returned to the stratosphere. It's still burning cash and posting negative Adjusted EBITDA. SNAP trades at about 8x next year's revenue - a big multiple relative to profitable and entrenched social media plays Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR).Again, Snap Inc deserves some credit -- and SNAP stock deserved some sort of rally. But 170% looks like far too much as investors are starting to realize. Roku (ROKU)Source: Shutterstock Roku (NASDAQ:ROKU) has taken a modest hit after Netflix earnings but still sits just off all-time highs. It's outperformed even SNAP, gaining 257% so far this year -- the best performance of over 700 stocks with a current market capitalization over $10 billion.Here, too, there are some reasons for optimism. Roku obviously is a play on streaming. And with new platforms coming from Disney (NYSE:DIS), AT&T (NYSE:T), and Comcast (NASDAQ:CMCSA), it's not hard to see why investors are excited.But this isn't exactly a risk-free story. Roku gets little in the way of revenue from Netflix or Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) unit YouTube. Its player sales -- about one-third of guided 2019 revenue -- are unprofitable. The current valuation is something like 17x platform revenue at a time when most media and content companies are trading at low- to mid-single-digit multiples. Even NFLX trades at less than half that multiple. * 10 Tech Stocks That Are Still Worth Your Time (And Money) This seems like another case where investors are paying any multiple for growth -- yet perhaps aren't understanding the full story. Roku has growth ahead -- but like so many overvalued stocks on this list, potentially not nearly as much growth as investors are pricing in.As of this writing, Vince Martin is long shares of Gap Inc. He has no positions in any other securities mentioned.The post 10 High-Flying, Overvalued Stocks in Danger of Crashing appeared first on InvestorPlace.
The Global X E-commerce ETF (EBIZ) is proving to be one of the stars among online retail exchange traded funds this year and this rookie fund could have the wind at its as it is supported by a slew of favorable, long-term data points. “While there is a perception that online shopping has become virtually ubiquitous, in Q1 2019, penetration rates were still low, with e-commerce sales representing just 10.2% of the $1.34 trillion of total retail sales in the US,” said Global X in a recent research note. Shopping and consumer trends are changing as more buyers rely on the convenience of online retailers to quickly and easily meet their discretionary needs.
Qualcomm (NASDAQ:QCOM) stock has been volatile over the past few months. QCOM stock went from $57 in mid-April to almost $90 by the end of the month. By mid-May -- one month after Qualcomm stock rocketed higher -- the shares were back down to $65.Source: Shutterstock Holy moly, that's a lot of volatility for a name that many own for income. Some income investors can ignore that kind of noise and use it to their advantage. That is, they can reap the reward of the gains of QCOM stock, yet smile when it declines, knowing that their reinvested dividends are buying more shares of QCOM stock. * 7 Stocks Top Investors Are Buying Now But QCOM stock looks like a tough dividend stock to stomach. After all, Qualcomm stock is bouncing around more than high-octane growth names like Shopify (NASDAQ:SHOP) and Roku (NASDAQ:ROKU), with the latter name recently hitting new, all-time highs. The bottom line is that there are far less volatile names with yields similar to that of QCOM stock.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut the charts indicate that Qualcomm stock could be presenting investors with the perfect buying opportunity. Let's take a closer look. Trading QCOM Stock Click to EnlargeQCOM is sitting right above its uptrend support, depicted by the upward-sloping blue line. However, on Tuesday QCOM stock importantly closed over its short-term downtrend resistance (depicted by the downward sloping blue line with the number "2" above it. ). A similar pattern has played out for a longer period of time, with the purple lines highlighting the wedge.So what does all this mean?That data alone isn't necessarily enough to convince investors to go long QCOM stock, but have a closer look; Qualcomm stock is staying above its 20-day and 50-day moving averages.The most attractive part of the setup, though, is the fact that QCOM is so close to its uptrend support and those moving averages. That puts buyers in a low-risk trading situation. Since it's easy for them to pull the plug on the trade and sell their position on a slight breakdown, they can avoid the pain of a major reversal. The only caveat is that QCOM can't be too volatile.With their downside limited, traders can look to ride QCOM stock up to its monthly high near $80.76. Click to EnlargeFor longer term investors, this trade setup may not be applicable. However, for them, another trade may be worthwhile. Specifically, it's pretty clear what a vital level $65 is for QCOM stock. While it seems unlikely that the tech giant would pull back and test that area, remember that it did so just last month.An unfavorable development involving Apple (NASDAQ:AAPL), the DoJ or any number of catalysts can negatively impact Qualcomm stock. Keep the $65 level in mind on any deep pullbacks. Weighing Qualcomm StockRecently, I asked whether being long Qualcomm stock was worth the risk. In its settlement with Apple, Qualcomm was paid at least $4.5 billion and agreed to a six-year licensing deal. Further, all legal disputes between the two companies were dropped, clearing a huge headwind for QCOM stock and making one of the world's richest firms its customer.The bulls didn't get to enjoy their spoils for long, though.The FTC made a huge fuss about Qualcomm, arguing that its practices are anti-competitive. Judge Lucy Koh ruled that QCOM is a monopoly and must change the way it does business. The FTC also accused QCOM of charging excessive licensing fees for its technology and has forced the company to submit annual compliance reports for the next seven years to the agency.On Wednesday, QCOM stock rose slightly as the DoJ reportedly sought to delay the enforcement of the antitrust ruling. The Justice Department argued that the ruling would force the Department of Energy and the Department of Defense to suffer intolerable supply disruptions. The DoJ also says that QCOM will likely win its appeal.At the end of the day, the legal issues facing QCOM create both opportunity and risk.While analysts, on average, only expect QCOM's earnings to increase an anemic 2.7% this year, investors are banking on forecasts of 35% growth next year.I like the way QCOM stock has set up on the chart, but I am also aware of its legal risks.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. Bret Kenwell was long AAPL, ROKU and SHOP. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks Top Investors Are Buying Now * The 10 Best Cryptocurrencies to Keep on Your Radar * 7 Marijuana Penny Stocks That Could Triple (But You Won't Make Money) The post Is Qualcomm Stock Presenting Investors With the Perfect Opportunity? appeared first on InvestorPlace.
When a company has a 300+ forward price-to-earnings ratio and its market value has more than doubled in a short time period, investors might start to think about trimming. "When I think of Shopify, I think of the ultimate e-commerce store for people who want to look like the big boys but can't. Shopify will help you do it -- and even lend you money to get you to the next level," Cramer said during his latest monthly video-conference call with members of his Action Alerts PLUS club for investors.
Walmart (NYSE:WMT) stock has taken off. Just since the beginning of June, the Walmart stock price has increased over 13%. Yet there's been very little news to support the rally of Walmart stock.Source: Shutterstock Indeed, the biggest piece of news over that period hardly seems bullish. As James Brumley noted last week, Recode reported that Walmart's e-commerce businesses are losing $1 billion a year. * 7 Stocks Top Investors Are Buying Now But that counterintuitively could be good news for Walmart stock. Those losses suggest all of the company's businesses excluding e-commerce are more profitable than its reported figures imply. A $1 billion e-commerce operating loss, at the guided 27% tax rate, suggests a roughly 26 cents per share headwind to earnings. The hit likely is even higher, given that management has noted that much of the losses are coming from India's Flipkart, where tax rates and tax deductions for losses are lower.InvestorPlace - Stock Market News, Stock Advice & Trading TipsAs a result, the impact of e-commerce losses on the company's EPS might be closer to 30 cents per share or higher. So Walmart's EPS, excluding its operating loss from e-commerce, would be closer to $5.15 this year rather than the current consensus estimate of $4.83.The problem at this point is that even that $5+ figure still leaves Walmart stock trading at 22.2 times its earnings, which is an awfully hefty valuation. That's a notable premium to the mid-teen P/E multiples that have historically been applied to Walmart stock.WMT stock isn't the only name that's benefited from that type of multiple expansion, and it's not the only one that's beset with these types of valuation questions. Indeed, in a market now at its all-time highs, there is no shortage of stocks in sectors like software and e-commerce that look too expensive.But Walmart stock highlights a growing trend outside tech as well. Right now, the market will seemingly pay any price for quality. The question is if, or when, that trend will break. The Obviously Expensive MarketOutside of the dot-com boom nearly two decades ago, it's difficult to remember a time when more stocks looked outrageously expensive. Most of the obvious choices - as is usually the case - are in tech, but not all.Beyond Meat (NASDAQ:BYND), for instance, trades at 25 times analysts' average estimate of its 2020 revenue. It's risen a stunning 153% from its initial close, on top of a 163% increase on its first day of trading.Shopify (NYSE:SHOP) has gained 134% so far this year, and trades at well over 20 times its 2019 revenue guidance. Another e-commerce play, Square (NYSE:SQ), isn't cheap, either.Snap (NYSE:SNAP) is unprofitable and valued at $20 billion. MongoDB (NASDAQ:MDB) has generated $300 million in sales over the past 12 months and has a market capitalization of over $8 billion.Those are just a few examples. There are dozens of stocks trading at over ten times revenue, even excluding early-stage biotech and pharmaceutical companies, which have little or no sales. Earnings multiples of 100+ aren't uncommon right now.Just a quick look around the market indicates that there at least are areas in which valuation doesn't seem to matter. And as good as these companies might be, it would appear to take something close to perfection for investors to get reasonable returns after paying these prices. That sounds a bit like a bubble, as many observers have argued. Walmart Stock and the Price of QualityBut somewhat quietly, similar valuation questions have risen among older, lower-growth names. Walmart's earnings multiples are the highest they've been since the financial crisis, by far. Again, this is a stock that for most of this decade has traded between 14 and 17 times its earnings.WMT stock isn't the only one. Microsoft (NASDAQ:MSFT) is targeting EPS growth in the range of 10% a year at best and now trades at something like 26 times next year's average EPS estimate. That multiple, too, seems to be the highest assigned the stock since the middle of the last decade, when the company's growth profile was very different.Walmart supplier Procter & Gamble (NYSE:PG) has executed an impressive turnaround. But it trades at 24 times forward earnings while analysts expect 6% profit growth next year. The shares of another consumer giant, Coca-Cola (NYSE:KO), tumbled after KO reported ugly Q4 earnings in February. Coke's pre-tax profits have declined over the past six years. Soda consumption is in the midst of a long-term decline, particularly in the U.S. Naturally, KO stock, too, is trading at an all-time high, with investors paying 23 times the average forward earnings estimate for it.Investors are paying whatever it takes right now to buy quality or something close to it. McDonald's (NYSE:MCD), Visa (NYSE:V) and Mastercard (NYSE:MA) all continue to soar and all sit at all-time highs. Even Home Depot (NYSE:HD), whose multiples according to market theory, should be dropping this late in the macroeconomic cycle, is following the trend.It's easy to look at the likes of BYND and SHOP and see a market "bubble," or something close to it, based on the multiples. But it's not just growth stocks that are receiving historically high - and questionable - valuations. What This Means for Walmart Stock Price - and the MarketThe question is whether these valuations can hold. And that question likely depends in part on a key factor: interest rates. Expectations are rising for a Federal Reserve rate cut (or two) this year. That puts investors in quite a bind.How, exactly, can an investor get returns? The ten-year Treasury bond yields a paltry 2.125%, with significant duration risk. (Duration risk simply means that if interest rates rise over that ten-year period, an investor won't be able to sell the bond at par, leaving her with the choice of keeping below-market rates or taking a loss.) Savings accounts and CDs (certificates of deposit) pay even less.Emerging market stocks, including Chinese issues, have significant risk. Europe's growth is meager. Even among U.S. issues, historically "defensive" sectors - notably healthcare and certain kinds of real estate - aren't as safe as they used to be.In that environment, choosing quality and ignoring valuation makes some kind of sense. And those of us investors (myself included) who have been balking at valuations for several years now have missed out on gains by the likes of MSFT and Walmart stock, let alone the 100%+ gains that stocks like SNAP, SHOP, and BYND have posted.But, again, the question is whether this phenomenon can continue. Bearish investors would argue that, at some point, valuations have to matter. Valuations have to come down. And Walmart stock would seem to be a prime candidate for a valuation cut.After all, WMT is facing real challenges now. Amazon.com (NASDAQ:AMZN) is a formidable competitor. The Sam's Club concept has stalled out. Walmart's international earnings have declined for some time, though the stronger dollar is an issue. And WMT's earnings growth remains meager.It doesn't seem like Walmart stock should be valued at 20+ times its earnings, but the valuation of WMT stock may have less to do with its business than many investors believe.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks Top Investors Are Buying Now * The 10 Best Cryptocurrencies to Keep on Your Radar * 7 Marijuana Penny Stocks That Could Triple (But You Won't Make Money) The post Why Wall Street Bears Should Be Watching Walmart Stock Closely appeared first on InvestorPlace.
Headquartered in Ottawa, Canada, Shopify (NYSE:SHOP) is a well-known and well-regarded multi-channel e-commerce platform. Millions of shares of SHOP stock are traded each and every day. And these traders have bid the Shopify stock price up from $25 to its current price of more than $300.Source: Shutterstock With their second-quarter earnings announcement coming up on Thursday, August 1, 2019, critics are ready to pounce on SHOP stock as an overpriced asset. Are they justified in this assessment, and can Shopify keep its cool as earnings season heats up? With Shopify Stock, High-Priced Doesn't Mean OverpricedAs I see it, there are three solid reasons to hold Shopify stock through earnings. Sure, earnings announcements can cause ticker volatility, but SHOP has just as much upside potential as downside risk.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip Long-term investors shouldn't forget that Shopify remains a pivotal player in multi-channel e-commerce: their platform powers over 800,000 businesses in approximately 175 countries. Many people consider Shopify's cloud-based SaaS solution the only serious option for retailers. Moreover, the company's platform scales readily across mobile, web, social media, and brick-and-mortar locations.So yes, the SHOP stock price is above $300, but that doesn't necessarily make it expensive. The average analyst price target is $325. Evidently, the experts don't mind paying the $300 price tag as the earnings announcement approaches. Can't Argue with the NumbersMy second reason for holding onto SHOP stock is based on simple math: after poring over the company's first-quarter results, there's little reason to be skeptical of Shopify's track record. Read 'em and weep: subscription revenues were up 40% year-over year, while merchant solutions increased year-over-year by an eye-popping 58%.On top of all that, Shopify's total revenues were a robust $320.5 million, up 50% YOY. The first-quarter results also revealed that 40% of eligible merchants now use Shopify's shipping platform: now that's what I call market share! Given these numbers, it's hard not to put Shopify in the same category as industry leaders like Amazon (NASDAQ:AMZN) or Salesforce (NYSE:CRM). A Big PlusThe third factor I'll be adding to the plus column is Shopify Plus. This is the company's e-commerce platform subscription for high-volume merchants. Shopify Plus has been a key catalyst for Shopify's recent growth as a company. To no surprise, it's also provided a launching pad for the SHOP stock price.During the second quarter of this year, Shopify Plus represented 26% of the company's $44.2 million in monthly recurring revenue. That's a solid increase over the 22% of monthly recurring revenue in the year-ago quarter represented by Shopify Plus.During the company's first-quarter earnings conference call, COO Harley Finkelstein observed that the strong momentum in Shopify Plus subscriptions benefited from "a strong sales team that is constantly improving as well as a strong mix of upgrades." I expect the company to continue their focus on Shopify Plus, and rightfully so: it's been a key driver of sales and revenues for over a year, with no signs of slowing down. The Bottom Line on SHOP StockShopify's strong first quarter of the year, according to CFO Amy Shapero, reflected "the diversity and strength of our growth drivers and the solid execution of our strategy." I tend to concur with this sentiment. Even as an incorrigible skeptic, I can't deny Shopify's compelling revenue and sales figures as of late.And so, the downside potential of the imminent earnings announcement won't scare me away from SHOP stock. Instead, I'll stand behind the e-commerce giant. And I'll keep my fingers crossed as the company finally reveals its next set of numbers.As of this writing, David Moadel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post 3 Reasons to Buy Shopify Stock Before Earnings appeared first on InvestorPlace.
Last month, Shopify opened up a major battlefront with Amazon, intensifying their e-commerce war. Shopify announced a plan to set up fulfillment centers across the US.
Shopify (NYSE:SHOP) stock is on fire year-to-date. Shares in the e-commerce platform zoomed 134% from January, with the stock currently trading around $322 per share. While the company's cloud-based SaaS solution for retailers is a game-changer, it is tough to justify a buy at the current valuation levels.Source: Shutterstock But with sales up 50% year-over-year, do the bulls have a point? Read on to see if Shopify stock is worth the sticker price. SHOP Continues to GrowShopify made its bones offering "back-end as a service" for scores of small e-commerce businesses. With that market locked up, SHOP stock needs new growth avenues to move the needle. With the company's move toward large enterprise customers, Shopify has found new ways to scale up the business into a global e-commerce powerhouse.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBased on Q1 2019 results, the growth story continues to play out. Total revenues were $320.5 million, up 50% year-over-year. Subscription revenues were up 40%, as merchants continue to sign up for the platform. The biggest growth was in Merchant Solutions, up 58% YOY. This growth was driven largely by increased merchandise volume among Shopify's third-party merchants.Shopify continues to develop its infrastructure, allowing them to become a global e-commerce powerhouse. The company's payments platform now enables merchants to accept sales in multiple currencies and get paid in their local currency; 40% of eligible merchants now use Shopify's shipping platform. The company's merchant cash advance unit grew 45% YOY.Shopify is to e-commerce what Salesforce is to CRM. The rise of e-commerce continues to be SHOP's strongest catalyst. But as SHOP scales up, will the company stumble along the way?With the Q2 earnings release anticipated to occur in August, within a few weeks, investors will have a clearer picture of Shopify's future growth. But for the time being, Shopify's recent fulfillment center announcement indicates their long-term strategic plans. * 7 Dependable Dividend Stocks to Buy With Fulfillment Center Expansion, Is Shopify the Next Amazon?Shopify surprised Wall Street with their announced plans to build their own fulfillment centers. The move created speculation that SHOP will go toe-to-toe with Amazon (NASDAQ:AMZN) for a bigger piece of the e-commerce pie.But can SHOP become the next AMZN? Building out their infrastructure makes Shopify a stronger partner for third-party retailers. But with the company barely generating $1 billion in sales, how do they expect to finance this massive build-out?Based on CFO Amy Shapero's presentation at Shopify's Investor Day, the company anticipates the fulfillment investment to be spread over the next five years. Shopify expects "incremental revenue to largely offset costs". The company anticipates positive returns on this investment to occur after 2023.The fulfillment build out is a long-term investment. Investors today pay a substantial premium for the expectations of Shopify's game-changing moves. But can this anticipated growth alone justify SHOP stock's current valuation? Valuation: How SHOP Stock Stacks Up to Its PeersWith SHOP continuing to post operating losses as it invests in growth, enterprise-value-to-sales is the best tool to compare SHOP stock's valuation to peers. Shopify currently trades at a EV/Sales ratio of 28.Here are the EV/Sales ratios of Shopify's main publicly traded peers:Amazon: 4.23PayPal Holdings (NASDAQ:PYPL): 8.5Square (NYSE:SQ): 9.4Twilio (NYSE:TWLO): 24.7The Trade Desk (NASDAQ:TTD): 21But given that Shopify is purely a SaaS platform, it is tough to compare valuation against its direct competitors. Amazon, being a full-fledged retailer as well as a marketplace, obviously trades at a lower EV/Sales valuation. PayPal is a fully scaled up operation, with slower growth but high operating margins.Twilio and The Trade Desk operate in different industries, but are similar to Shopify in that both are cloud services providers (cloud communications for Twilio, digital advertising for The Trade Desk).With Shopify stock trading at a premium to fellow B2B service providers TWLO and TTD, SHOP appears richly valued. While the company is making leaps and bounds dominating e-commerce, the stock is not a buy at these valuation levels. * 10 Stocks Driving the Market to All-Time Highs (And Why) Bottom Line: SHOP Stock Not A Buy TodayTen years down the line, Shopify could be a formidable competitor to Amazon. But at the current trading price, SHOP stock is too overvalued for investors to consider.While the company has seen significant growth in revenues, the company has yet to be profitable. While the announced fulfillment expansion is a positive catalyst for future growth, investors need tangible results before putting in a buy order.Short term, SHOP stock is a sell. A massive pullback could signal a buying opportunity to place a bet on SHOP's future prospects. But until then, investors should be cautious before chasing this growth story.As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Dependable Dividend Stocks to Buy * 10 Stocks Driving the Market to All-Time Highs (And Why) * 7 Short Squeeze Stocks With Big Upside Potential The post Why Short-Term Investors Should Avoid Shopify Stock appeared first on InvestorPlace.
About a year ago, I coined the high-growth STARS acronym on InvestorPlace, saying that these five growth stocks -- Shopify (NYSE:SHOP), The Trade Desk (NASDAQ:TTD), Adobe (NASDAQ:ADBE), Roku (NASDAQ:ROKU), and Square (NYSE:SQ) -- are the high quality, big return potential stocks that investors want to buy now and hold for the next several years.The idea behind the STARS acronym was simple. The market's favorite high-growth acronym -- FANG, which comprises Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) -- was becoming increasingly obsolete for investors. That's not to say that FANG companies have peaked. They haven't. They are still doing very well. But, they are such large companies and long FANG is such a crowded trade, that the long-term return potential in these names isn't what it used to be. It almost certainly isn't the best return potential investors can find in the overlap of growth and technology.STARS is exactly that. Each one of the STARS stocks is supported by huge secular growth trends, is small relative to their addressable markets, is unknown relative to the FANG stocks, and has huge upside potential in a multi-year window. That's why I told investors to forget FANG and buy the STARS stocks a year ago.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThe results speak for themselves. Over the past year, the S&P 500 is up about 7.5%. Had you bought one share in each of the FANG stocks, you would be up just 5% over the past year. But, had you bought one share in each of the STARS stocks, you would be up more than 70% over the past year. Click to EnlargeIn other words, STARS stocks have generated more than 60 points of alpha over both the S&P 500 and FANG stocks over the past twelve months. * 7 Dependable Dividend Stocks to Buy This out-performance from the STARS group will continue. Without further ado, let's take a deep look at why you should buy each one of these high-quality growth stocks. STARS Stocks to Buy for the Long Run: Shopify (SHOP)Source: Shutterstock Trailing 12-Month (TTM) Gain: 90%The Bull Thesis Tag Line: "The Next Big Thing in Commerce"Core Bull Thesis: The secular bull thesis on e-commerce solutions provider Shopify is simple. Thanks to the widespread proliferation of the internet, the commerce world is two doing things: One, it's pivoting into direct retail, wherein brands and merchants are selling to and communicating with customers. Two, it's also pivoting into a decentralized model, wherein anyone can sell anything to anyone else.Shopify is at the heart of both these pivots, providing the tools which allow any seller to sell any item through any direct channel, and is thus levered to benefit from the expansion of these two huge secular tailwinds.These tailwinds are still in their early innings. Shopify's gross merchandise value represents less than 1.5% of global e-retail sales, and is growing at a steady 50%-plus pace. Further, Shopify just started to jump into the physical retail world, dramatically expanding this company's addressable market.As such, SHOP has the necessary room and firepower to keep growing at a robust rate for a lot longer.Key Growth Projections: * Shopify goes from 1.5% e-retail market penetration today, to 7.5% penetration by 2030, as direct decentralized retail trends gain mainstream traction. * Shopify goes from about 0% physical retail market penetration today, to about 0.5% penetration by 2030, as Shopify finds some success in the physical retail world. * Total gross merchandise volume (GMV) and Merchant Solutions revenue grow at about 30% annualized pace into 2030. * Subscription Solutions revenue grows at a high teens annualized pace, as Shopify continues to grow its merchant base. * Total revenue grows at a 25%-plus pace over the next decade. * Operating margins scale from 1% today, to 25% by 2030, as robust revenue growth drives significant operating leverage on already huge gross margins. * 2030 EPS settles around $25, versus projected EPS in 2019 of $0.60.Long-term Price Target: About $750, based on a commerce platform average 30-forward multiple on projected fiscal 2030 EPS of $25.Present Value: About $300, based on a 10% discount rate and a 2029 price target of $750. The Trade Desk (TTD)TTM Gain: 160%The Bull Thesis Tag Line: "The Future of Advertising"Core Bull Thesis: The secular bull thesis on The Trade Desk centers around something called programmatic advertising. Programmatic advertising is essentially automation in the ad industry. Before, ad spend allocation was largely a guess-and-check effort, while ad transactions were conducted between two human parties. Programmatic advertising automates both of those processes, leveraging AI and big data to optimize ad spend allocation and dynamically transact ads based on those optimal allocations. In this sense, programmatic advertising is the future of advertising.The Trade Desk is one of the most important players in the programmatic advertising world, and one of the fastest growing, too. But, ad spend through the TTD platform measures less than 1% of the near $300 billion global digital ad market. That market is rapidly marching towards $500 billion-plus levels. Eventually, most of that $500 billion-plus worth of spend will be transacted programmatically, and the lion's share of that programmatic spend will happen through TTD.As such, The Trade Desk has huge growth potential over the next several years through automation in the ad world, and if all that growth potential materializes as expected, TTD stock will fly higher from here.Key Growth Projections: * The global advertising market measures around $1 trillion by 2025, up from $650 billion-plus this year. * The digital ad market grows to around $650 billion by 2025, representing 65% share versus 45% share in 2018, as engagement and ad dollars continue to flow into the digital channel. * TTD grows its share in the digital ad market from less than 1% in 2018, to 2-2.5% by 2025, as programmatic advertising becomes more widely used across various ad formats and channels. * Gross spend on TTD and revenues grow at a 25%-plus pace into 2025. * Profit margins gradually move higher as robust revenue growth drives positive operating leverage on healthy gross margins. * 2025 EPS comes in around $15, versus 2019 estimates of $2.90. * 10 Stocks to Sell for an Economic Slowdown Long Term Price Target: About $375, based on a digital ad average 25-forward multiple on projected 2025 EPS of $15.Present Value: About $230, based on a 10% discount rate and a 2024 price target of 375. Adobe (ADBE)TTM Gain: 20%The Bull Thesis Tag Line: "The Cloud Giant in a Visually Dominated World"Core Bull Thesis: The secular bull thesis on cloud giant Adobe is predicated on two very simple ideas: First, the world is becoming increasingly obsessed with visuals. Consumers are increasingly engaged in visual-first social media apps, like Instagram and Snapchat. They are also spending more time on visual-content-heavy streaming platforms like Netflix. At the same time, businesses are increasingly using visuals to communicate with their customers, since these forms of communication are what resonates most deeply with today's consumer. Thus, both consumers and enterprises are shifting to a more visually-focused world.Second, Adobe is the unrivaled king in delivering visual solutions. Sure, there are a ton of Adobe competitors out there, but none really rival Adobe. They are all just knock-offs. Long story short, Adobe dominates the visual-focused industry, and when it comes to creating visuals on both the consumer side (e.g. editing a photo for Instagram) and the enterprise side (e.g. creating a visually aesthetic ad campaign), everyone turns to Adobe solutions.Put those two ideas together, and it becomes increasingly obvious that Adobe has plenty of room to grow over the next several years as both consumers and enterprises increasingly adopt visual-focused cloud solutions.Key Growth Projections: * Adobe's Document Cloud, Creative Cloud, and Experience Cloud businesses continue to grow at a robust pace over the next several years given digital and visual related tailwinds, and ultimately power about 15% annualized revenue growth into 2025. * Gross margins expand gradually towards 90% as Adobe benefits from steady but small price hikes given lack of competition. * Operating margins expand towards 50% as 15% revenue growth drives healthy operating leverage on huge gross margins. * EPS settles around $23 by fiscal 2025.Long Term Price Target: About $460, based on a growth average 20 forward multiple on projected fiscal 2025 EPS of $23.Present Value: About $290, based on a 10% discount rate and a fiscal 204 price target of $460. Roku (ROKU)Source: Shutterstock TTM Gain: 111%The Bull Thesis Tag Line: "The Cable Box of the Streaming World"Core Bull Thesis: When I first created the STARS acronym, the most controversial stock on the list was Roku, given what many perceived as huge competition risks. But, ROKU stock is up 111% over the past year as the company's secular bull thesis has drowned out competition risks.The core bull thesis here is that Roku is becoming the central access point (or "cable box") of the streaming world -- a platform which consumers everywhere rely on to access their favorite streaming services like Netflix, HBO, Amazon Video, and the like.A year ago, there were concerns that Roku couldn't maintain this "cable box of the streaming world" positioning because bigger competitors would come in and gobble up its customer base. But, those concerns missed three big things: 1) Roku is content-neutral, it's competitors aren't, and this content neutrality ultimately makes for a more friction-less viewing experience; 2) Roku is already the runaway leader in this space, and consumers like the intuitive Roku UI; and 3) the streaming space will big enough to accommodate more than one service platform aggregator.As such, Roku has done nothing but rattle off big-growth quarter after big-growth quarter over the past year, and ROKU stock has more than doubled in the process. The streaming market globally is still relatively nascent, and ad dollars are just now starting to follow consumers into the streaming channel, so Roku's long-term growth narrative is in its first few innings. Over the next several years, the company will continue to rattle off big-growth quarters and ROKU stock will trend higher.Key Growth Projections: * The global streaming-video-on-demand (SVOD) market grows from roughly 300 million households today (25% TV household penetration), to around 600 million households by 2025 (35% TV household penetration, assuming mild global TV household growth). * Roku's platform goes from about 30 million accounts in 2018 (about 10% market share) to about 100 million by 2025 (about 17.5% share). * Average revenue per user rises at roughly 15% per year into 2025, as unit SVOD revenue moves higher due to higher streaming service prices and more streaming service subscriptions per account, and AVOD revenue moves higher from a higher inflow of ad dollar volume. * Total revenues rise at a 25%-plus pace into 2025. * Platform gross margins scale towards 70%, while player gross margins stay around 5%. * The opex rate drops to 40% as robust revenue growth drives significant operating leverage. * EPS settles around $5.50 by 2025. * 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond Long Term Price Target: About $165, based on a big growth 30-forward multiple on projected fiscal 2025 EPS of $5.50.Present Value: About $100, based on a 10% discount rate and a projected 2024 price target of $165. Square (SQ)Source: Shutterstock TTM Gain: 22%The Bull Thesis Tag Line: "The Backbone of Modern Commerce"Core Bull Thesis: The secular bull thesis on Square is based on the idea that Square is transforming into the backbone of the the modern commerce world by creating a payments ecosystem tailored to 21st century consumption and retail habits.Consumers globally are pivoting away from cash transactions towards non-cash transactions, because non-cash transactions are significantly more convenient and more levered to digital shopping. As such, global non-cash transaction volume has risen at a steady 10%-plus clip for the past several years.Over the next several years, non-cash payments volume is expected to run at a 10%-plus pace, driven by heavier card usage in developed economies and broader urbanization and digitization in developing economies.Square has built a payments platform which helps merchants of all shapes and sizes process these non-cash transactions. On top of that, the company has developed a myriad of tangential solutions - such as a digital peer-to-peer payments app, an enterprise payroll app, and lending services - all of which are tailored to the consumption and retailing habits of the 21st century.Square is developing a payments ecosystem which is built for modern commerce. Yet, the platform still only accounts for 0.35% of all global retail sales. As such, the trends and addressable market here imply that Square has a lot of room and firepower to grow over the next several years.Key Growth Projections: * Global retail sales grow at a 5% compounded annual growth rate into 2025 to nearly $34 billion, due to inflation and global urbanization trends. * Square's market share of the global retail sales pool rises from 0.35% in 2018, to 1% by 2025, as the company expands its reach in the physical retail world from micro-merchants to bigger merchants, and as the company takes a deeper dive into the e-commerce world. * Square GPV grows at a 20%-plus annualized pace into 2025, while revenues grow at at 25%-plus annualized pace, driven by incremental revenue from hardware and ancillary solutions. * Profit margins move steadily higher over the next several years as increased scale drives positive operating leverage. * EPS settles around $4.50 by fiscal 2025.Long Term Price Target: About $135, based on a payments stock average 30-forward multiple on fiscal 2025 EPS of $4.50.Present Value: About $85, based on a 10% discount rate and a fiscal 2024 price target of $135.As of this writing, Luke Lango was long FB, AMZN, NFLX, GOOG, SHOP, TTD, ADBE, ROKU, and SQ. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Dependable Dividend Stocks to Buy * 10 Stocks Driving the Market to All-Time Highs (And Why) * 7 Short Squeeze Stocks With Big Upside Potential The post 5 STARS Stocks Smashing the Market (FANG Stocks, Too) appeared first on InvestorPlace.
Beyond Meat stock, up more than 560% since its May debut, leads five hot stocks setting up new buying opportunities. Zoom and Shopify are also on the list.
Shopify (NYSE:SHOP) has had an incredible run. Since January the price has almost tripled, before pulling back to current levels around $310. Many investors are wondering if it is time to sell their SHOP stock holdings.Source: Shutterstock Wall Street feels that the shares are fairly valued. Some 28 firms follow SHOP and the average price target is $325. But then again, these highly paid pros that make these predictions are often wrong.The vast majority of discussions about investments are about what to buy. Lists of stocks to buy and stock recommendations are all over the financial media. I very rarely see any discussions or advice concerning selling or what stocks to sell.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThis is ironic because knowing how to sell can be more important than knowing what to buy. When investors hold a stock they become fearful. If the stock goes down they are afraid of taking a loss and if it goes up they become afraid of losing their profit. This causes people to sell their winners too soon and to hold onto their losers for too long. Sound familiar? * 7 Retail Stocks to Buy for the Second Half of 2019 Adrenaline-driven Irrational DecisionsFear makes adrenaline levels rise. This evolutionary response to fear may have benefited humans 20,000 years ago if they were being chased by a saber tooth tiger or hunting a woolly mammoth, but it is not beneficial to trading and investing. This adrenaline rush causes people to make irrational decisions. This is why computers and algorithmic trading increasingly dominate the markets. These computers do not have emotions so they do not make the same emotionally driven mistakes that humans do.This leads us to the most important rule of successful trading or investing: Do not enter a position unless you know where you are going to sell. You should know where you will sell to take your profits and you should know where you will bail out and take your losses. If you have these levels clearly defined it will help prevent you from losing money by making an irrational decisions. If you do not know how you are going to sell then you are just guessing. You would be better off at a casino. You'll still lose money, but at least you can get free drinks and maybe Cirque du Soleil tickets. Selling SHOP StockHere is how I would apply this to SHOP stock. One possible profit target would be $330. This is a logical target because it was where the high was on June 20. A second possible way to profit is to sell it when it becomes overbought again. As you can see on the chart, the last three times SHOP became overbought it was a selling opportunity, The stock trended lower afterwords each time. A third possible sell-for-profit target would be $325, the average price target of the firms that follow it. It really doesn't matter which target you use. The important thing is to have a set target or sell rule so when SHOP gets to your level, you will know what to do. This will help prevent emotional mistakes. * 10 Stocks to Sell for an Economic Slowdown For determining where to take a loss, the logic is the same. Which rule or target you use isn't as important as having a set rule or target. The idea is to take the emotions out of it. It isn't to try to mastermind the markets.A trailing stop is one way to do it. This would be to sell it if it falls a certain percent. For example, if you have a trailing stop of 5% you would sell SHOP if it fell to $304. Another potential sell technique could be to sell if the uptrend breaks. There has been a well-defined uptrend here. The breaking of this trend-line could be a signal to sell. A third method could be a moving average (MA) crossover. For example, sell if the 10-day MA crosses down through the 20-day MA.Bottom Line on Selling Shopify StockIf you understand that we humans have not evolved in a way that is conducive to successful investing you'll dramatically improve your results. Our emotional response caused by the fear of losing money causes us to make irrational decisions. A way to deal with this is to remember and implement the most important rule of investing. You should know where you will sell to take your profits and where you will bailout and take your loses before you buy a stock. Those rules apply here with Shopify stock.Disclosure: As of this writing, the author did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Buy for Less Than Book * 7 Marijuana Stocks With Critical Levels to Watch * The 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond The post As Analysts See Shopify Stock as Fairly Valued, Investors Ponder How to Sell appeared first on InvestorPlace.
As Shopify continues to shape e-commerce, its revenues and stock are soaring ahead. Investors looking to join in the opportunity are being asked to pay up for quality, however.
We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is...