SHOP - Shopify

[valueinvestor]

I don't comment in this forum normally, but as someone who has ran an ecommerce business full time for the last 3 years, reading this thread full of investors who clearly don't have a deep understanding of the ecommerce game, is particularly illuminating.

 

It gives me a better perspective of how Mr. Market can get things wrong for long periods of time. Shopify is going to make $100B in revenue in ten years apparently. According to a "valueinvestor." Just... wow.

 

 

The most important thing is really- Shopify sells a tool. It's a nice tool, they do a good job of marketing that tool, it's a well known quality tool. But it's just a tool. The engine to any ecommerce business is web traffic, or customers. Cost of customer acquisition makes or breaks you.

 

Shopify provides no way to gain attention, they have no retail customers. Speaking on behalf of ecommerce store owners, we are slaves to the platforms where the customers hangout. Slave to Facebook, slave to Instagram, slave to Pinterest, slave to Google, super-slave to Amazon. I sell on Amazon, if I wanted to switch to another platform, I would have to entirely rebuild my marketing strategy and core business model. THAT is what high switching costs look like. THOSE businesses are truly valuable, and deserve rich valuations.

 

Shopify does not have truly high switching costs for us ecommerce sellers. They really do not have as much pricing power as investors think, and a large % of their customer base is relying on supply chains that have been permanently disrupted due to Covid. This is a dangerous time to invest in this company IMO, unless the purpose is pure speculation over the short term.

 

If you look at Shopify as a company that sells a tool, then your analysis makes sense. However, it's like saying Apple sells phones, and Netflix rents videos.

 

You are completely dismissing the possibility that Shopify will become an integral tool for all omnichannel providers and possibly the only tool. Shopify's R&D budgets are essentially the size of its next largest competitor's revenues.

 

Even, Amazon has closed their "webstore" services and recommended people to use Shopify.

I'm not sure what e-commerce business you ran - but am I safe to assume you started with a dropshipping website and turned into an FBA store (I guess because you were mentioning the importance retail customers on these platforms)? If you're basing your investment thesis on this, then it's heavily flawed.

 

Businesses, especially small businesses will need to have e-commerce in the future, and when they choose which platform to use - I'll argue Shopify is the only option out there for them. In order to gain customer attention, they will use other advertisers to run traffic to their store.

 

At the end of the day, I may not be right that this could be a $100B revenue-generating company in ten years. However, I'm sure it's wrong to base your investment opinion because Shopify is just a "tool". Unless you believe 100% of e-commerce transactions will only go through Amazon, then I wouldn't agree with you.

 

+1. Shopify is now the 2nd largest company in Canada by market cap, passing TD Bank today -- behind only the Royal Bank of Canada.

 

I believe the attached is driving the current momentum. Not sure how long this will last.

Ouch! History is hasn't been kind to Canadian companies that shot to the top of market cap list and weren't a bank.

 

I know! :P

 

I've been burned before by investing in Valeant - so maybe you should render all my opinions as a zero for that fact alone haha.

 

To justify it at today's valuation - in ten years it has to do about $100B in revenues, which I believe it can if it issues stocks at highs and invest in long run-way projects that could be huge winners.

 

It's a great company, no doubt.

 

But 10 years is a long time to wait to justify today's valuation. What's your discount rate?

 

 

Not exact as I did a simple one in my head but I used a discount rate of 10%.

 

Ending Remarks:

 

Please note that I just offered my opinion, not making a recommendation or no way shape or form saying this is a value investment. This stock can well be expensive if they don't hit their targets. Once they don't hit their targets, then this will most likely go down so fast.

[valueinvestor]

If you are a seller who relies on Amazon or Google, you have a job not a business.

 

Disclosure: No position. I question the economics of the business but they meet an important need and do it very well.

 

+1

[valueinvestor]

Thank you. This is the kind of first-hand expertise we need more on the forum. I hope you post more often going forward.

 

Me too! It's good to have new opinions. Edit: To challenge your views, however, I feel I agitated Orange with my post - hope it's not the case, and it's me misinterpreting the tone on a forum like I would with a text.

[Gregmal]

Yea.... first, shorting this on valuation is stupid. But some never learn.

 

Second, this is the type of company old fashioned value investors will buy 10 years from now at much higher prices because all of a sudden it "makes sense" to them, just the same as they are currently doing with Netflix and Amazon....

 

I dont own this, if I had a gun to my head, I'd be short, but the "valuation" thesis is just evidence that people dont learn from their mistakes.

[valueinvestor]

Yea.... first, shorting this on valuation is stupid. But some never learn.

 

Second, this is the type of company old fashioned value investors will buy 10 years from now at much higher prices because all of a sudden it "makes sense" to them, just the same as they are currently doing with Netflix and Amazon....

 

I dont own this, if I had a gun to my head, I'd be short, but the "valuation" thesis is just evidence that people dont learn from their mistakes.

 

Since I always loved your insights - what would make you go long?

[Gregmal]

I cant say I'd ever go long this because I dont understand the advantages and technology to the degree I think one should if you're doing anything more than swinging a momentum trade. Originally, I'd say a large market wide selloff and steep decline, but that just happened and I stuck to shit like GOOG, MSFT, CIBR in the tech sphere.

 

At the same time, what would make me bullish is the continued bang the head against the wall pundits and people who's surface understanding of how markets work let that compel them to short away on valuation or fall into the same bear traps you see over and over with stocks like this. Of course, when the market(and everything else crashes) those folks are there to say "I knew I was right", but then weeks later the resiliency of stocks like this, and Tesla, and big tech, is on full display again, but at or near the highs, having outperformed all the "value" stuff that was supposed to be a safe haven. At which point we start up the "its a bubble" rhetoric to justify being wrong again.

 

As I said, no position, but the narratives and market fodder is always entertaining. If you understand these types of companies and what drives them, you've got the tiger by the tail. Most dont. I dont. I've had similar luck trading with companies like NVTA. 100x revenues is absurd. But its not as reason to immediately write anything off. Like I said, I laugh at the folks who are NOW "enlightened" with Amazon, etc... you dont get multi baggers unless there is some sort of degree of skepticism and controversy around a compelling. Usually "valuation" debate is the major provider of that.

[Jurgis]

If you are a seller who relies on Amazon or Google, you have a job not a business.

 

EXPE and BKNG say "Ouch!".

[valueinvestor]

If you are a seller who relies on Amazon or Google, you have a job not a business.

 

EXPE and BKNG say "Ouch!".

 

I think they are if I remember their quarterlies correctly - you know - to be fair.

[mloub]

To summarize this market:

 

Shopify is the next Amazon

Wayfair is the next Amazon

Chewy.com is the next Amazon for Pet Owners

Tesla is the next Apple

 

Value investing is quaint, but what is the point of fundamental analysis when it just keeps passing over these great new Economy companies that are clearly going to be the next Amazon/Apple? These companies aren't over-valued. This time really is different!

 

Silly value investors, Mr. Market is offering you all these early-stage Amazons and Apples and you're asking about the financials? Can't you see, the financials don't matter. All that matters is the mildly plausible story about how these companies will become the next Amazon or Apple.

 

I mean could you really live with yourself if you didn't get in on the ground floor (or middle floor, I guess) of the next best thing? YOLO, and all that.

 

M.

 

[mloub]

I'm so old, I actually remember reading this Scott McNealy quote in Businessweek when it came out in 2002. McNealy, the CEO of Sun Microsystems thought things got crazy in the DotCom bubble because Sun was selling for 10x Revenues:

 

"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"— Scott McNealy, Business Week, 2002

 

But that just seems quaint now, doesn't it? SHOP is selling at almost 50x 2019 revenues. You know, because it is going to be the next Amazon, and it has unlimited growth potential as basically an intermediary for small mom and pop on-line businesses. By collecting 2.9% of its merchant's sales, and a small fixed fee, SHOP would only need to get 36 million merchants, and $3 trillion in sales moving through their platform to get revenues up to $100 billion from $1.5Bn where they currently sit. That all seems completely plausible.

 

M.

 

 

 

[matts]

I'm so old, I actually remember reading this Scott McNealy quote in Businessweek when it came out in 2002 in a glossy magazine. McNealy, the CEO of Sun Microsystems thought things got crazy in the DotCom bubble because Sun was selling for 10x Revenues:

 

"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"— Scott McNealy, Business Week, 2002

 

But that just seems quaint now, doesn't it. SHOP is selling at almost 50x 2019 revenues. You know, because it is going to be the next Amazon, and it has unlimited growth potential as basically an intermediary for small mom and pop on-line businesses. By collecting 2.9% of its merchant's sales, and a small fixed fee, SHOP would only need to get 36 million merchants, and $3 trillion in sales moving through their platform to get revenues up to $100 billion from $1.5Bn where they currently sit. That all seems completely plausible.

 

M.

 

that all sounds nice. but now rewrite what you wrote, but change SHOP to AMZN and pretend it's 1998. amazon used to trade at what? 40x sales in the 90s? That turned out ok. and back then it was "just a bookstore". it was ONLY collecting a small fee on each sale of...a book. how quaint! They used their customer base to expand into other businesses, something SHOP could potentially do.

 

 

I'm not even advocating for SHOP, but your analysis is way too simplistic.

 

 

[Gregmal]

Yea my major point was that I try to learn from the past, both mistakes and successes; both my own and that of others. This company has a lot of the hallmarks of those home run types. Which is not to say it cant be a bust, because thats always a possibility. But the beauty of investing on the long side is that all you can lose is your investment. Thats quite powerful when it comes to taking risks with multi bagger potential. So while I may not go long, I know better than to be tempted to go short.

[thowed]

change SHOP to AMZN and pretend it's 1998.

 

I'd forgotten that fantastic Scott McNealey quote.

 

Yes, for Amazon, but I suppose I think that for every Amazon there were a lot more pets.com, and it's much easier to have chosen the right one in retrospect.

 

If one was to have chosen Amazon (and held on during the bad times - requiring a great deal of blind faith) I think it was likely to have been because a) it had SUCH a first-mover advantage and b) Bezos appeared to be quite special and driven.

 

So sure, maybe Shopify will be big.  But my confidence levels would not make me size it much in a portfolio.

 

[mloub]

I'm so old, I actually remember reading this Scott McNealy quote in Businessweek when it came out in 2002 in a glossy magazine. McNealy, the CEO of Sun Microsystems thought things got crazy in the DotCom bubble because Sun was selling for 10x Revenues:

 

"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"— Scott McNealy, Business Week, 2002

 

But that just seems quaint now, doesn't it. SHOP is selling at almost 50x 2019 revenues. You know, because it is going to be the next Amazon, and it has unlimited growth potential as basically an intermediary for small mom and pop on-line businesses. By collecting 2.9% of its merchant's sales, and a small fixed fee, SHOP would only need to get 36 million merchants, and $3 trillion in sales moving through their platform to get revenues up to $100 billion from $1.5Bn where they currently sit. That all seems completely plausible.

 

M.

 

that all sounds nice. but now rewrite what you wrote, but change SHOP to AMZN and pretend it's 1998. amazon used to trade at what? 40x sales in the 90s? That turned out ok. and back then it was "just a bookstore". it was ONLY collecting a small fee on each sale of...a book. how quaint! They used their customer base to expand into other businesses, something SHOP could potentially do.

 

 

I'm not even advocating for SHOP, but your analysis is way too simplistic.

 

Sadly, simplistic analyses are all I'm capable of.

 

But just think of how fortunate we are to live in this time. While our predecessors had to settle for just one Amazon, and one Apple, we have dozens of each just waiting to be scooped up by those smart enough to have learnt from the earlier generation's mistakes of omission. I for one am holding out for the next Amazon that is selling for 100x sales. None of that half-baked 50x sales stuff. I mean it's just capital, and if you're not willing to risk it (or some fraction of it) hitting a grand slam, are you even really an investor?

 

M.

 

[Gregmal]

I'm so old, I actually remember reading this Scott McNealy quote in Businessweek when it came out in 2002 in a glossy magazine. McNealy, the CEO of Sun Microsystems thought things got crazy in the DotCom bubble because Sun was selling for 10x Revenues:

 

"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"— Scott McNealy, Business Week, 2002

 

But that just seems quaint now, doesn't it. SHOP is selling at almost 50x 2019 revenues. You know, because it is going to be the next Amazon, and it has unlimited growth potential as basically an intermediary for small mom and pop on-line businesses. By collecting 2.9% of its merchant's sales, and a small fixed fee, SHOP would only need to get 36 million merchants, and $3 trillion in sales moving through their platform to get revenues up to $100 billion from $1.5Bn where they currently sit. That all seems completely plausible.

 

M.

 

that all sounds nice. but now rewrite what you wrote, but change SHOP to AMZN and pretend it's 1998. amazon used to trade at what? 40x sales in the 90s? That turned out ok. and back then it was "just a bookstore". it was ONLY collecting a small fee on each sale of...a book. how quaint! They used their customer base to expand into other businesses, something SHOP could potentially do.

 

 

I'm not even advocating for SHOP, but your analysis is way too simplistic.

 

Sadly, simplistic analyses are all I'm capable of.

 

But just think of how fortunate we are to live in this time. While our predecessors had to settle for just one Amazon, and one Apple, we have dozens of each just waiting to be scooped up by those smart enough to have learnt from the earlier generation's mistakes of omission. I for one am holding out for the next Amazon that is selling for 100x sales. None of that half-baked 50x sales stuff. I mean it's just capital, and if you're not willing to risk it (or some fraction of it) hitting a grand slam, are you even really an investor?

 

M.

 

What would you call Venture Capitalists? Our Google's Moonshot division?

 

I try to be open minded to different strategies and while generally its a value oriented approach, theres more than one way to skin a cat.

[Castanza]

Are there any resources to see what's under the hood of Shopify? Not their tech stack, but the businesses that use their tech. It's easy to see the growth/demand in a bull market, but during a downturn I wonder if the world really needs a thousand t-shirt companies selling the same product with their own logo on it.

 

https://www.shopify.com/blog/shopify-stores

 

There are literally hundreds of examples of stores like this.

[mloub]

I'm so old, I actually remember reading this Scott McNealy quote in Businessweek when it came out in 2002 in a glossy magazine. McNealy, the CEO of Sun Microsystems thought things got crazy in the DotCom bubble because Sun was selling for 10x Revenues:

 

"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"— Scott McNealy, Business Week, 2002

 

But that just seems quaint now, doesn't it. SHOP is selling at almost 50x 2019 revenues. You know, because it is going to be the next Amazon, and it has unlimited growth potential as basically an intermediary for small mom and pop on-line businesses. By collecting 2.9% of its merchant's sales, and a small fixed fee, SHOP would only need to get 36 million merchants, and $3 trillion in sales moving through their platform to get revenues up to $100 billion from $1.5Bn where they currently sit. That all seems completely plausible.

 

M.

 

that all sounds nice. but now rewrite what you wrote, but change SHOP to AMZN and pretend it's 1998. amazon used to trade at what? 40x sales in the 90s? That turned out ok. and back then it was "just a bookstore". it was ONLY collecting a small fee on each sale of...a book. how quaint! They used their customer base to expand into other businesses, something SHOP could potentially do.

 

 

I'm not even advocating for SHOP, but your analysis is way too simplistic.

 

Sadly, simplistic analyses are all I'm capable of.

 

But just think of how fortunate we are to live in this time. While our predecessors had to settle for just one Amazon, and one Apple, we have dozens of each just waiting to be scooped up by those smart enough to have learnt from the earlier generation's mistakes of omission. I for one am holding out for the next Amazon that is selling for 100x sales. None of that half-baked 50x sales stuff. I mean it's just capital, and if you're not willing to risk it (or some fraction of it) hitting a grand slam, are you even really an investor?

 

M.

 

What would you call Venture Capitalists? Our Google's Moonshot division?

 

I try to be open minded to different strategies and while generally its a value oriented approach, theres more than one way to skin a cat.

 

Venture Capitalists and Google's Moonshot division are the only thing keeping me sane these days. Just when I think the world has gone to hell in a hand basket, I think of the Venture Capitalists, and Google's Moonshot division and my faith in humanity is restored. God bless them one and all, doing the Lord's work.

 

M.

 

[jschembs]

I'm so old, I actually remember reading this Scott McNealy quote in Businessweek when it came out in 2002 in a glossy magazine. McNealy, the CEO of Sun Microsystems thought things got crazy in the DotCom bubble because Sun was selling for 10x Revenues:

 

"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"— Scott McNealy, Business Week, 2002

 

But that just seems quaint now, doesn't it. SHOP is selling at almost 50x 2019 revenues. You know, because it is going to be the next Amazon, and it has unlimited growth potential as basically an intermediary for small mom and pop on-line businesses. By collecting 2.9% of its merchant's sales, and a small fixed fee, SHOP would only need to get 36 million merchants, and $3 trillion in sales moving through their platform to get revenues up to $100 billion from $1.5Bn where they currently sit. That all seems completely plausible.

 

M.

 

that all sounds nice. but now rewrite what you wrote, but change SHOP to AMZN and pretend it's 1998. amazon used to trade at what? 40x sales in the 90s? That turned out ok. and back then it was "just a bookstore". it was ONLY collecting a small fee on each sale of...a book. how quaint! They used their customer base to expand into other businesses, something SHOP could potentially do.

 

 

I'm not even advocating for SHOP, but your analysis is way too simplistic.

 

Sadly, simplistic analyses are all I'm capable of.

 

But just think of how fortunate we are to live in this time. While our predecessors had to settle for just one Amazon, and one Apple, we have dozens of each just waiting to be scooped up by those smart enough to have learnt from the earlier generation's mistakes of omission. I for one am holding out for the next Amazon that is selling for 100x sales. None of that half-baked 50x sales stuff. I mean it's just capital, and if you're not willing to risk it (or some fraction of it) hitting a grand slam, are you even really an investor?

 

M.

 

What would you call Venture Capitalists? Our Google's Moonshot division?

 

I try to be open minded to different strategies and while generally its a value oriented approach, theres more than one way to skin a cat.

 

What venture capitalist invests at a $75 billion valuation?

[mloub]

Are there any resources to see what's under the hood of Shopify? Not their tech stack, but the businesses that use their tech. It's easy to see the growth/demand in a bull market, but during a downturn I wonder if the world really needs a thousand t-shirt companies selling the same product with their own logo on it.

 

https://www.shopify.com/blog/shopify-stores

 

There are literally hundreds of examples of stores like this.

 

Castanza, these questions are making me doubt my vibe, and I have to say, I don't like it. I don't like it one bit. How many people wear T-shirts? Billions! That's all you need to know. No more boring, bone-headed questions, please.

 

 

M.

 

[BG2008]

Are there any resources to see what's under the hood of Shopify? Not their tech stack, but the businesses that use their tech. It's easy to see the growth/demand in a bull market, but during a downturn I wonder if the world really needs a thousand t-shirt companies selling the same product with their own logo on it.

 

https://www.shopify.com/blog/shopify-stores

 

There are literally hundreds of examples of stores like this.

 

As someone who has been buying clothing from Costco (great Puma socks, Jeans, flannels, not so great Kirkland T Shirts), these websites actually made me interested and curious.  I'm glad I took a look.  The visuals are great and stunning. 

[Gregmal]

I'm so old, I actually remember reading this Scott McNealy quote in Businessweek when it came out in 2002 in a glossy magazine. McNealy, the CEO of Sun Microsystems thought things got crazy in the DotCom bubble because Sun was selling for 10x Revenues:

 

"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"— Scott McNealy, Business Week, 2002

 

But that just seems quaint now, doesn't it. SHOP is selling at almost 50x 2019 revenues. You know, because it is going to be the next Amazon, and it has unlimited growth potential as basically an intermediary for small mom and pop on-line businesses. By collecting 2.9% of its merchant's sales, and a small fixed fee, SHOP would only need to get 36 million merchants, and $3 trillion in sales moving through their platform to get revenues up to $100 billion from $1.5Bn where they currently sit. That all seems completely plausible.

 

M.

 

that all sounds nice. but now rewrite what you wrote, but change SHOP to AMZN and pretend it's 1998. amazon used to trade at what? 40x sales in the 90s? That turned out ok. and back then it was "just a bookstore". it was ONLY collecting a small fee on each sale of...a book. how quaint! They used their customer base to expand into other businesses, something SHOP could potentially do.

 

 

I'm not even advocating for SHOP, but your analysis is way too simplistic.

 

Sadly, simplistic analyses are all I'm capable of.

 

But just think of how fortunate we are to live in this time. While our predecessors had to settle for just one Amazon, and one Apple, we have dozens of each just waiting to be scooped up by those smart enough to have learnt from the earlier generation's mistakes of omission. I for one am holding out for the next Amazon that is selling for 100x sales. None of that half-baked 50x sales stuff. I mean it's just capital, and if you're not willing to risk it (or some fraction of it) hitting a grand slam, are you even really an investor?

 

M.

 

What would you call Venture Capitalists? Our Google's Moonshot division?

 

I try to be open minded to different strategies and while generally its a value oriented approach, theres more than one way to skin a cat.

 

What venture capitalist invests at a $75 billion valuation?

 

I thought I'd been clear here I am not really talking about SHOP but rather the mentality of investing where you place small wagers with the expectation of letting it play its course; home run upside and wipe out downside...

[jschembs]

I'm so old, I actually remember reading this Scott McNealy quote in Businessweek when it came out in 2002 in a glossy magazine. McNealy, the CEO of Sun Microsystems thought things got crazy in the DotCom bubble because Sun was selling for 10x Revenues:

 

"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"— Scott McNealy, Business Week, 2002

 

But that just seems quaint now, doesn't it. SHOP is selling at almost 50x 2019 revenues. You know, because it is going to be the next Amazon, and it has unlimited growth potential as basically an intermediary for small mom and pop on-line businesses. By collecting 2.9% of its merchant's sales, and a small fixed fee, SHOP would only need to get 36 million merchants, and $3 trillion in sales moving through their platform to get revenues up to $100 billion from $1.5Bn where they currently sit. That all seems completely plausible.

 

M.

 

that all sounds nice. but now rewrite what you wrote, but change SHOP to AMZN and pretend it's 1998. amazon used to trade at what? 40x sales in the 90s? That turned out ok. and back then it was "just a bookstore". it was ONLY collecting a small fee on each sale of...a book. how quaint! They used their customer base to expand into other businesses, something SHOP could potentially do.

 

 

I'm not even advocating for SHOP, but your analysis is way too simplistic.

 

Sadly, simplistic analyses are all I'm capable of.

 

But just think of how fortunate we are to live in this time. While our predecessors had to settle for just one Amazon, and one Apple, we have dozens of each just waiting to be scooped up by those smart enough to have learnt from the earlier generation's mistakes of omission. I for one am holding out for the next Amazon that is selling for 100x sales. None of that half-baked 50x sales stuff. I mean it's just capital, and if you're not willing to risk it (or some fraction of it) hitting a grand slam, are you even really an investor?

 

M.

 

What would you call Venture Capitalists? Our Google's Moonshot division?

 

I try to be open minded to different strategies and while generally its a value oriented approach, theres more than one way to skin a cat.

 

What venture capitalist invests at a $75 billion valuation?

 

I thought I'd been clear here I am not really talking about SHOP but rather the mentality of investing where you place small wagers with the expectation of letting it play its course; home run upside and wipe out downside...

 

Okay, but this is a thread about SHOP, so I suppose I'm just trying to bring your theoretical back to the topic at hand.

[Gregmal]

I'm so old, I actually remember reading this Scott McNealy quote in Businessweek when it came out in 2002 in a glossy magazine. McNealy, the CEO of Sun Microsystems thought things got crazy in the DotCom bubble because Sun was selling for 10x Revenues:

 

"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"— Scott McNealy, Business Week, 2002

 

But that just seems quaint now, doesn't it. SHOP is selling at almost 50x 2019 revenues. You know, because it is going to be the next Amazon, and it has unlimited growth potential as basically an intermediary for small mom and pop on-line businesses. By collecting 2.9% of its merchant's sales, and a small fixed fee, SHOP would only need to get 36 million merchants, and $3 trillion in sales moving through their platform to get revenues up to $100 billion from $1.5Bn where they currently sit. That all seems completely plausible.

 

M.

 

that all sounds nice. but now rewrite what you wrote, but change SHOP to AMZN and pretend it's 1998. amazon used to trade at what? 40x sales in the 90s? That turned out ok. and back then it was "just a bookstore". it was ONLY collecting a small fee on each sale of...a book. how quaint! They used their customer base to expand into other businesses, something SHOP could potentially do.

 

 

I'm not even advocating for SHOP, but your analysis is way too simplistic.

 

Sadly, simplistic analyses are all I'm capable of.

 

But just think of how fortunate we are to live in this time. While our predecessors had to settle for just one Amazon, and one Apple, we have dozens of each just waiting to be scooped up by those smart enough to have learnt from the earlier generation's mistakes of omission. I for one am holding out for the next Amazon that is selling for 100x sales. None of that half-baked 50x sales stuff. I mean it's just capital, and if you're not willing to risk it (or some fraction of it) hitting a grand slam, are you even really an investor?

 

M.

 

What would you call Venture Capitalists? Our Google's Moonshot division?

 

I try to be open minded to different strategies and while generally its a value oriented approach, theres more than one way to skin a cat.

 

What venture capitalist invests at a $75 billion valuation?

 

I thought I'd been clear here I am not really talking about SHOP but rather the mentality of investing where you place small wagers with the expectation of letting it play its course; home run upside and wipe out downside...

 

Okay, but this is a thread about SHOP, so I suppose I'm just trying to bring your theoretical back to the topic at hand.

 

The topic had to do with why invest in SHOP? Which came back to, of course, snide "valuation" based remarks that fall into the same category of "why value investors miss great investments"(or buy them after all the gains have been made) to which I explained the logic behind investing in these types of companies, or avoided falling for the temptation to short. Thats all...

[mloub]

Yes, exactly. A great framework for investing is where you take a flyer on an asset with a large likelihood of a wipe out downside, but a small chance of a home run. I believe the old timers call this a "Margin of Safety". But if that proposition doesn't seem appealing to you, don't worry, just hold a 100 of these ideas, and then you'll have the law of averages working on your side, and you're sure to win!

 

M.

 

[mloub]

I'm so old, I actually remember reading this Scott McNealy quote in Businessweek when it came out in 2002 in a glossy magazine. McNealy, the CEO of Sun Microsystems thought things got crazy in the DotCom bubble because Sun was selling for 10x Revenues:

 

"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"— Scott McNealy, Business Week, 2002

 

But that just seems quaint now, doesn't it. SHOP is selling at almost 50x 2019 revenues. You know, because it is going to be the next Amazon, and it has unlimited growth potential as basically an intermediary for small mom and pop on-line businesses. By collecting 2.9% of its merchant's sales, and a small fixed fee, SHOP would only need to get 36 million merchants, and $3 trillion in sales moving through their platform to get revenues up to $100 billion from $1.5Bn where they currently sit. That all seems completely plausible.

 

M.

 

that all sounds nice. but now rewrite what you wrote, but change SHOP to AMZN and pretend it's 1998. amazon used to trade at what? 40x sales in the 90s? That turned out ok. and back then it was "just a bookstore". it was ONLY collecting a small fee on each sale of...a book. how quaint! They used their customer base to expand into other businesses, something SHOP could potentially do.

 

 

I'm not even advocating for SHOP, but your analysis is way too simplistic.

 

Sadly, simplistic analyses are all I'm capable of.

 

But just think of how fortunate we are to live in this time. While our predecessors had to settle for just one Amazon, and one Apple, we have dozens of each just waiting to be scooped up by those smart enough to have learnt from the earlier generation's mistakes of omission. I for one am holding out for the next Amazon that is selling for 100x sales. None of that half-baked 50x sales stuff. I mean it's just capital, and if you're not willing to risk it (or some fraction of it) hitting a grand slam, are you even really an investor?

 

M.

 

What would you call Venture Capitalists? Our Google's Moonshot division?

 

I try to be open minded to different strategies and while generally its a value oriented approach, theres more than one way to skin a cat.

 

What venture capitalist invests at a $75 billion valuation?

 

I thought I'd been clear here I am not really talking about SHOP but rather the mentality of investing where you place small wagers with the expectation of letting it play its course; home run upside and wipe out downside...

 

Okay, but this is a thread about SHOP, so I suppose I'm just trying to bring your theoretical back to the topic at hand.

 

The topic had to do with why invest in SHOP? Which came back to, of course, snide "valuation" based remarks that fall into the same category of "why value investors miss great investments"(or buy them after all the gains have been made) to which I explained the logic behind investing in these types of companies, or avoided falling for the temptation to short. Thats all...

 

Well, Sir, now you've got my goat! My comments have been called aloof, indifferent, arrogant, sarcastic, borderline autistic, but snide! Now you've gone too far! I remember a time when folks shared their views on the internets freely...Wait a minute, I just googled snide. I'm sorry, I didn't realize that's what it meant. Yes, carry on. I'll allow it.

 

M.