Canadian tech sensation Shopify (Shopify Stock Quote, Chart TSX, NYSE:SHOP) is a great company headed in the right direction, says Scotia Wealth’s Greg Newman, the only problem is that the stock is almost fully priced, so new investors will need to wait for a pullback.
Last week, Shopify released its fourth quarter financials, coming in with revenue of $343.9 million and a loss of $1.5 million. On an adjusted basis, SHOP generated 26 cents per share of profit, which was more than the 15 cents per share a year prior and better than the Street’s average of 20 cents per share. (All figures in US dollars unless noted otherwise.)
The market took the Q4 results in stride, with the stock now up a sparkling 26 per cent for the year so far.
“This is a name that we’ve owned, fortunately, since $40.00, so it has done very well for us,” says Newman, senior wealth advisor for Scotia Wealth Management, to BNN Bloomberg on Thursday.
“Last quarter was a beat, everything’s up and looking good,” he says. “The only thing is that their guidance was not quite as good as what the Street was looking for. Having said that, they’re probably being conservative.”
For the upcoming Q1/19, Shopify management is projecting revenues between $305 and $310 million and a GAAP operating loss in the range of $47 to $49 million. For the full 2019 year, management is calling for revenue between $1.46 and $1.48 billion and a GAAP operating loss in the range of $140 to $150 million.
“They are spending in Shopify Plus and international branding which we believe is the right long-term strategy,” says Newman. “The bottom line is that we model 55 per cent earnings per share growth to this name and 38 per cent revenue growth.”
“I like it, I own it. Would I buy it at today’s price? No. It’s somewhere near the top of its range. But this is a name that as long as they continue to execute like they have, the addressable market is huge, and you want to add to it on weakness,” he says.