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Shopify 2020 Valuation: Booming Growth Continues

Published on: June 4 2023 by pipiads

Hey everyone, welcome back to the channel! Today, we're going to take a quick look at Shopify, go through a DCF on them, walk you through my assumptions there, and talk a little bit about the company.

- Shopify is a Canadian-based payment processing checkout company.

- They have about 1.7 million retailers on their e-commerce platform.

- The company's current stock price is $1,100, and its market cap is $150 billion.

Overview of the company:

- Shopify is more than just a checkout cart. They have a range of offerings,

Shopify is about 10% of total U.S. e-commerce capital

Shopify's Q3 Results: GMV Up 11%, Operating Loss Smaller Than Expected

Shopify's Q3 results exceeded expectations, with a smaller than expected operating loss and an 11% increase in GMV. This article will delve into what's going on with Shopify and whether we're in the midst of a turn here.

Macro Tailwinds of E-commerce and Digitalization:

At a macro level, the tailwinds of e-commerce and digitalization remain strong long-term. Global e-commerce is expected to reach $7 trillion by 2025, and Shopify is one of the most dominant players in the space. Consumers' favorite brands are almost entirely on Shopify, from Galaxia to Fiori to Aloe Yoga.

Q3 Results:

During the third quarter, more merchants than ever before used Shopify's solutions, including payments, capital, fulfillment, and audiences. The merchant solution attached rate is 2.14, which means more merchants are taking more of Shopify's solutions. Revenue was $1.4 billion, up 22% on a three-year KAGGER, and adjusted gross profit was $681 million, up nearly 11%.

Operating Expense Growth:

Shopify is also decelerating year-on-year operating expense growth and has about $5 billion in cash on its balance sheet. The sequential decline in expected Opex has been a topic of discussion, but Shopify has always been very thoughtful when it came to managing expenses.

Capital Allocation:

Shopify has been a company that pre-delivered acquisition has been organic and funded by redeploying gross profits into the business. The cash they've raised externally has been used strategically to accelerate the product roadmap. They believe they can continue to invest in things like buyer relationships, going global, and logistics while being good stewards of capital and good capital allocators.

Merchant Solutions:

Shopify plays a much larger role in simply making it easier to sell across different services. Small businesses starting with Shopify are growing really large, and they also have very large companies like Glossier and Spanx coming to them. They can play a much larger role in helping merchants find more customers regardless of the climate by providing more versatility.

Economic Activity into Next Year:

Shopify year-over-year consumer spending lives up about 8.2%, and month-to-month spending remains steady. Merchants during the pandemic had to reset how they did business and where they sold, and the same thing goes now. If one particular channel is not working well, shift to a different channel. Shopify wants to make it really easy for merchants to find more customers regardless of the climate, and they believe they'll see a good holiday season.

Shopify Stock - DCF Valuation and Technical Analysis

According to our DCF evaluation of Shopify stock, we believe the stock is worth forty dollars per share, representing a buy rating with fourteen percent upside. To make our forecasts, we projected the entire income statement and other line items, such as depreciation and amortization, share-based compensation, other operating activities, and capital expenditures. We used historical data to project future revenues and costs, calculating them as a percentage of revenues. We projected revenue growth rates of 50% in 2022, 50% in 2023, 45% in 2024, 40% in 2025, and 35% in 2026. We also projected the cost of goods sold, gross profit, and gross margins, which have been consistent historically and are projected to decline over time. We projected the SG&A and R&D expenses as a percentage of revenues and used the averages from 2017 to 2021 for future projections. We also projected the net income and free cash flow to the firm, and calculated the continuing value of the firm using a growth rate of 2.5%, which we believe represents the growth rate of the US economy. Our DCF model gives us a buy rating for Shopify and indicates that the stock is currently undervalued. However, it's important to note that our assumptions are based on the numbers and figures alone, and further research is recommended before making personal projections. In terms of technical analysis, we believe that Shopify will continue trading within the range of 30 to 40 dollars per share, with key support and resistance levels at 30, 40, and 54 dollars per share.

How to research Shopify's Valuation on Simply Wall St (NYSE:SHOP)

In this article, we explore Shopify's recent performance and its valuation section on the Simply Wall Street company report. We examine the reasons for its recent decline in stock price and lower guidance, including its heavy investment losses and non-cash gains. We also analyze the risks and rewards of investing in Shopify, including its high level of non-cash earnings, volatile share price, and declining earnings forecast. We caution against relying solely on current price-to-earnings ratios and emphasize the importance of considering the company's future growth prospects and expected earnings growth. We examine Simply Wall Street's estimate of fair value, which suggests that Shopify may be overvalued based on analysts' expectations of future free cash flows. However, we note that such estimates depend on assumptions and inputs that may vary depending on individual investors' opinions and research. Ultimately, we recommend that investors conduct their own research on Shopify's underlying business, services, and growth potential before making investment decisions.

Shopify: Making Sense of Their Astronomical Valuation

many investing channels and resources out there - they tend to use complicated jargon and concepts that can be overwhelming for beginner investors. My goal is to simplify investing and make it accessible to everyone, especially younger investors who are just starting out. I believe that everyone should have the opportunity to build wealth and secure their financial future through investing, and I hope that my videos can help people do just that. So thank you for watching, and I'll see you in the next one.

How to Calculate Customer Lifetime Value for your Ecommerce Store (& Shopify)

Are you struggling to calculate the customer lifetime value for your store? Don't worry because I am here to guide you through it step by step. In this article, I will provide you with some easy tips to improve your customer lifetime value and build a successful brand.

Step 1: Calculating Customer Lifetime Value

-Export all your orders from the Shopify dashboard in a plain CSV file.

-Open the file and paste it into a Google sheet.

-Filter the data and use formulas like unique and countif to calculate the number of orders and total value of each customer.

-Calculate the customer lifetime value and average purchases per customer.

Step 2: Improving Customer Lifetime Value

-There are two main parts to customer lifetime value: the size of the order and the number of times someone buys from you.

-To increase the average order value, offer free shipping over a certain amount, give discounts for larger purchases, offer bundle deals, cross-sells, and upsells, and add gifts for larger purchases.

-To increase the average amount of times someone purchases from you, offer great customer service, sell products that people keep buying, retarget past customers, and focus on building a brand.

By following these easy tips, you can improve your customer lifetime value and build a successful brand. Remember to focus on providing great value and customer service, and use marketing strategies like retargeting and building a loyal customer base to increase your sales.

4 Essential Shopify Reports To Grow Your Store

Hey guys, it's Christian here and today we're going to discuss four essential reports to grow your Shopify store. Let's get started!

To successfully grow your Shopify store, it's important to keep track of key metrics using analytics. In this article, we'll go over four essential reports that can help you make data-driven decisions to improve your business.

1. Traffic Report:

The traffic report is a Shopify report that tells you all about your website traffic. It breaks down the data according to each channel, such as organic, social, direct, referral, email, or paid search. With this report, you can determine which channel is bringing you the most revenue and prioritize it accordingly. You can also optimize your website for specific keywords to rank higher in organic searches.

- To access the traffic report, go to analytics dashboards and scroll down to online sessions by traffic source. Click on the view report to see the sessions by refer.

2. Average Order Value (AOV) Report:

The AOV report calculates the average order value by dividing the total value of your sales by the number of sales made in a given period. It helps determine the future direction of your marketing strategy. If your AOV is low, you can increase it by bundling, cross-selling, or upselling more products. Adding free shipping can also encourage customers to purchase more items.

- To access the AOV report, go to the dashboard and scroll down to average order value. Click on the view report to see the average order value over time.

3. Sales Over Time Report:

The sales over time report gives you the number of orders and total sales made over a specific time period. It helps you draw conclusions about which marketing efforts are working and strategize accordingly. For example, if you saw an increase in sales after optimizing your site for specific keywords, you should continue to improve your SEO.

- To access the sales over time report, go to the dashboard and click on view report under total sales.

4. Returning Customer Report:

The returning customer report tells you which of your previous customers are returning to your store to purchase more than one product. You can arrange them based on how much they spend so far, their first and last purchase date, and the total number of orders. Valuing your returning customers makes it more likely that they will refer others to your store.

- To access the returning customer report, go to the dashboard and look for customer return rate.

Analyzing Shopify reports is crucial to growing your business. These four essential reports can help you make informed decisions to improve your marketing strategy, increase revenue, and retain customers. Keep track of your analytics regularly to identify areas that need improvement and capitalize on opportunities.

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