|Bid||328.55 x 1200|
|Ask||329.30 x 1000|
|Day's Range||329.68 - 339.00|
|52 Week Range||117.64 - 339.00|
|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|
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.
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?
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...
Shopify Inc. , the leading multi-channel commerce platform, plans to announce financial results for its second quarter ended June 30, 2019 before markets open on Thursday, August 1, 2019.
Investors in online marketplace Shopify (NYSE:SHOP), one of Canada's best tech names, have enjoyed the stock's stellar move up in 2019; so far this year, SHOP stock has soared 133%. On June 20, the Shopify stock reached an all-time high of $338.94.Source: Shopify via FlickrShopify is expected to report its second-quarter earnings on July 30. Now that SHOP's earnings are approaching, let's look at what may be next for SHOP stock, which has been a darling of Wall Street since its IPO in 2015. SHOP's Q1 Earnings and BackgroundOn Apr. 30, SHOP reported strong Q1 results that beat analysts' average estimates on both the top and bottom line, thanks to strong demand for its subscription solutions. Shopify reported revenues of $320.4 million, which was up almost 50% year-on-year. Its net loss came in at $24.2 million.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Retail Stocks to Buy for the Second Half of 2019 In a nutshell, Shopify sells out-of-the-box e-commerce solutions. The company's growth comes from two segments: "Merchant Solutions" and "Subscription Solutions."Merchant Solutions includes tools that enable merchants to serve their customers better and sell more products. Within Merchant Solutions, SHOP offers payment services, shipping services, and a working capital management tool.Subscription Solutions offer merchants of all sizes monthly recurring subscription plans that cost from under $10 to over $2,000 per month. SHOP now has over 800,000 sellers, an increase of 25% over the past year.Shopify Plus, the premium version of Shopify, has over 5,300 customers, including names like Johnson & Johnson (NYSE:JNJ), Unilever (NYSE:UL), and the Obama Foundation.A quarter of the company's monthly recurring revenues comes from Shopify Plus merchants. SHOP has recently launched a multi-currency feature for Shopify Plus merchants who also use Shopify Payments.During the Q1 earnings conference call, CEO Tobi Lutke stressed that SHOP would continue to innovate and launch new products and services for both merchants and their customers. Wall Street also expects the company to continue to grow via acquisitions. Shopify Stock's Global GrowthManagement has also been looking at expanding overseas, especially in non-English-speaking countries, as the company's next key growth area. In Q1, the company's overseas customer base grew, enabling its international revenue growth to accelerate.Earlier in the year, Shopify launched its payment gateway, Shopify Payments, in Germany, making bank account transfers possible there. Several of Canada's provinces have used Shopify to launch online cannabis stores, giving Shopify even more global visibility.In its efforts to expand beyond the core English-speaking countries, the company has recently made the Shopify website available in six other languages: French, German, Japanese, Italian, Brazilian Portuguese, and Spanish; the website is soon expected to be available in 11 languages.In other words, Shopify is an attractive company with excellent growth prospects in cloud-based e-commerce , both in North America and globally. However, investors also need to be aware of some question marks facing SHOP stock. Should Investors Be Concerned About the Valuation of SHOP Stock?SHOP stock bears point out that, given the high valuation of Shopify stock, the shares would be hit hard if a recession occurs. Even if the stock market does not go up as rapidly as it has over the past decade, then the momentum of high-flying names like SHOP stock will slow down, too.For example, SHOP stocks's price-sales (P/S) ratio is high enough to make value investors run for cover. Shopify stock's P/S ratio stands at about 30. To put the metric into perspective, the S&P 500's average price-sales ratio is 2.1.Another way to look at this number is to compare the company's current P/S ratio with its P/S ratios over time. Since going public, SHOP stock'a lowest and highest P/S level has respectively been 6.86 and 30.In other words, at present, its P/S ratio is at its highest level ever. That essentially means that the owners of SHOP stock are paying a lot more for Shopify stock now than they were when the P/S ratio was 6.Another way to analyze the P/S ratio is to compare it with the ratios of companies in similar sectors. The P/S ratio of Amazon (NASDAQ:AMZN) is four. Alibaba's (NASDAQ:BABA), P/S ratio stands at eight. And MercadoLibre (NASDAQ:MELI) stock's P/S is 17.Although the P/S ratio of SHOP stock is very high, investors should also remember that it is only one of many valuation metrics. Moreover, it does not take into account the profitability or costs of Shopify. What Else Could Derail SHOP Stock?SHOP bulls are happy to point out that the company's revenue growth is showing no sign of slowing down.But on the other hand, Shopify has not yet reported any profits. If SHOP cannot keep meeting the Street's aggressive growth forecasts, then the owners of SHOP stock may become more concerned about its lack of profit, and Shopify stock could drop.During Q1, SHOP launched its TV and film content division, Shopify Studios, Wall Street is debating why Shopify has decided to create such content. And in June, SHOP announced that it would be launching a fulfillment network and offer two-day shipping across 99% of the continental U.S. Analysts believe this ambitious strategy is likely to be quite costly for Shopify.Instead of focusing on profits, management wants to expand the company by launching new businesses. Therefore, those who plan to own SHOP stock over the long-term need to pay attention to the cash flows from its new ventures.Many investors have been quite concerned about the various reports by short seller Citron Research which regards Shopify's business model as a "get-rich-quick-scheme." Moreover, several analysts have recently downgraded SHOP stock in response to its stellar bull run.Finally, those investors who follow short-term technical charts will be interested to know that Shopify stock has spent a good portion of 2019 in overbought territory. It is possible that some profit-taking will negatively impact SHOP stock in the near future, possibly prior to its Q2 earnings report. The Bottom Line on Shopify StockIn a few weeks, SHOP stock is likely to release another strong quarterly report. However, SHOP stock is simply too expensive for me to hit the "buy" button on it at these levels.SHOP is a growth stock and a speculative stock. Therefore, in the coming weeks, I expect SHOP to be a battleground between investors and traders. While long-term investors would like to see Shopify stock go over the $350 level, traders are likely to keep it between $300 and $250.Those who have benefited from SHOP's 2019 gains should possibly consider taking profits as we look ahead to the next earnings report.Well-performing stocks tend to keep on winning, and the recent strength of Shopify stock might be a good indication that within three or four years, investors who buy SHOP on weakness are likely to be rewarded handsomely.As of this writing, Tezcan Gecgil 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 on College Students' Radars * 7 Retail Stocks to Buy for the Second Half of 2019 * The S&P 500's 5 Best Highest-Yielding Dividend Stocks The post Is Shopify Stock Getting Ahead of Its Fundamentals? appeared first on InvestorPlace.
As many pundits and analysts have pointed out, there's no doubt that the valuations of Square (NASDAQ:SQ) and Shopify (NASDAQ:SHOP) are huge. The gigantic valuations of Square stock and SHOP stock may prove to be justified, if pretty much everything goes their way, enabling their businesses to continue to quickly expand and become much more profitable. Source: Chris Harrison via Flickr (Modified) Stepped-up competition from companies like Amazon (NASDAQ:AMZN) and PayPal (NASDAQ:PYPL), or macro factors like an intense recession are a real threat, though. If they don't find a way to keep growing their businesses and profits rapidly, the valuations of Square stock and Shopify stock will prove to be too high. As a result, Square stock and Shopify stock will drop rapidly. * 10 Best Stocks for 2019: A Volatile First Half At this point, given all of the potential obstacles SQ and SHOP are facing, along with their gigantic valuations, I think they each only have a roughly 35% chance of preventing their stocks from eventually dropping sharply in the next year or two.InvestorPlace - Stock Market News, Stock Advice & Trading TipsMoreover, I would estimate that there is only a 10% chance that either SQ stock or SHOP stock will rise more than 300% over the next five years. How to Jumpstart Square Stock and SHOP StockBut, by combining forces, SQ and SHOP would dramatically increase their chances of lighting a fire under SQ stock and SHOP stock.The main concept is pretty simple. A merger of equals would create one of the biggest cross-selling opportunities in history. Of course, most of Square's customers currently use its products to make face-to-face sales, and most of SHOP's customers use its products to build online stores.Put a different way, SQ primarily services customers who concentrate on selling their products in brick-and-mortar stores or on the road, while SHOP's bread and butter is facilitating online sales.There is likely a bit of overlap between the two companies' customer bases, since some businesses are beginning to have a physical and online presence, and the lion's share of businesses currently focus on one venue or the other.So if the two companies merge, they could greatly increase their customer bases by aggressively marketing their products to the other's customers.Specifically, SQ could sell its point-of-sale tools and its debit card to SHOP's customers, and SHOP could market its software and platform to Square's customers.As InvestorPlace columnist Luke Lango has pointed out, retail is now a combination of brick-and-mortar and e-commerce. Consequently, many of Square's physical-only customers will eventually look to sell their products online, while many of SHOP's online-only customers will eventually try to sell their products face-to-face.By merging, SHOP and SQ can more efficiently target each other's customers, since SQ will have easy access to the contact information and other data on SHOP's customers and vice versa. Square Stock and Raising CapitalI believe that many investors and banks would be tremendously enthusiastic about a merger between SQ and SHOP. As a result, SQ stock and SHOP stock would rise dramatically going into and immediately after the deal.Furthermore, banks would jump to lend money to the companies at very favorable terms. The rally of Square stock and Shopify stock, along with the companies' new loans, would enable them to recruit more and better talent using stock-based compensation and higher salaries.They could also acquire more and better companies, and sell shares of SHOP stock and SQ stock to raise a great deal of additional money. Using the additional funds, they could develop and launch new products, such as insurance and wealth management services, both of which, by the way are offered by Alibaba's (NYSE:BABA) fintech unit, Ant Financial. Alibaba Has Shown the WaySpeaking of BABA, after combining forces, SQ and SHOP will have access to a tremendous amount of customer data and capital. Using those assets, they can expand into many businesses and efficiently use artificial intelligence to become the American version of Alibaba.Thanks to its data on small businesses, large investments, and prolific use of AI, BABA's ecosystem has successfully expanded into many areas other than e-commerce, including lending, logistics, online payments and advertising.Merging would indeed enable SQ and SHOP to emulate BABA, become one of the most valuable companies in the world and closely rival or even surpass Amazon.As of this writing, the author did not own shares of any of the companies mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 A-Rated Stocks to Buy for the Rest of 2019 * 7 Education Stocks to Buy for the Future of Academia * 5 Stocks to Buy as You Rebalance Your Portfolio The post A Merger with Shopify Could Be What SQ Stock Needs to Keep Popping appeared first on InvestorPlace.