SHOPIFY NYSE:SHOP ANALYST: LUKE MCCARTHY - LM CAPITAL RESEARCH
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Shopify [NYSE:SHOP] Analyst: Luke McCarthy
Contents:
1.0 Investment Highlight
2.0 Business Description
2.1 Company Updates & Events
2.2Company Strategies
2.3 Management
3.0 Macro-economic & Sector Outlook
3.1 Global
3.2 US
3.3 E-commerce
4.0 Operations
4.1 Revenue
4.2 Gross Profit
4.3 Operating Profit
4.4 Net Profit
5.0 Valuation
5.1 Discounted Cash Flow
5.2 P/E
5.3 Comparative
6.0 Investment Thesis, Catalysts & Risks
6.1 Investment Thesis
6.2 Catalysts
6.3 Risks
7.0 Important Disclosures2nd December 2018
Recommendation
HOLD
Price Target: $160
SHOPIFY [NYSE:SHOP]
Investment Highlight 1.0 Profile
We initiate our coverage on Shopify (Shop) with a Hold, setting a Closing Price $ 152.66
52 Week Range $ 92.41 - 176.6
price target for the firm of $160, implying a upside of 5%. Key
Shares Outstanding 106,647,222
drivers of this rating and price target are stated below: Market Cap $ 16.3B
EPS (TTM) -0.64
Short Interest 7.4%
• Merchant Solutions, we see the movement away from Beta 2.14
subscription-based revenue to merchant-based revenue as a P/E -
firm sign of increasing maturity, showing Shopify clients EV/EBITDA (YE 2017) -223.5
growing with Shopify and producing more value for Shopify EV/EBIT (TTM) -166.0
through streams other than subscriptions such as payments, Insider Holding -
Insitutional Holdings 71.39%
capital and shipping. We see strong grow here with revenues
Key Financials
here rising 62% this year with 261% growth to the end of Ye 2017 Ye 2018 Ye 2019
2020. Revenue 673,304 1,054,367 1,650,858
• Asia, Asia’s nearing $1.5 Trillion e-commerce market is huge EBIT (49,157) (107,750) (28,851)
expansion potential for Shopify. With only 10.5% of Shopify’s EBITDA (65,776) (138,133) (64,715)
2017 revenue coming from non-US Canadian Australian and Gross Margin 56% 56% 55%
UK sources Shopify has some catching up to do which we see Net Margin -5.9% -7.5% 0.3%
as good potential value for Shopify assuming they can crack EPS (0.42) (0.72) 0.04
ROA -3.6% -4.0% 0.2%
the notoriously closed Asian web platform market.
ROC -4.6% -4.8% 0.2%
• Economic Conditions, with over 50% of Shopify’s revenue Gross Merchandise Volume
linked to the performance of their client’s business economic
30
headwinds could severely hamper Shopify’s ability to
25
Gross Merchandise
Volume (Billions)
generate revenue. This is especially poignant given the
20
current concern over economic conditions in Europe and the
15
US and worries over the coming to an end of the current
10
economic cycle with the growth of growth in the US Shopify’s
5
biggest market to slow over the coming few years.
0
2013 2014 2015 2016 2017
Source: Company data
Source: Company data
1|PageBusiness Description 2.0
Shopify is a cloud-based, multi-channel commerce platform designed for small and medium-sized businesses operating
in in Canada, the United States, the United Kingdom, Australia, and internationally. Shopify builds web- and mobile-
based software that lets merchants set up online storefronts. customers use the platform to manage their sales
channels, including web and mobile storefronts, physical retail locations, social media storefronts, and marketplaces.
The Shopify platform provides merchants with a single view of their business and customers across all their sales
channels and enables them to manage products and inventory, process orders and payments, ship orders, build
customer relationships, and leverage analytics and reporting from one software solution.
2.1 Company Updates & Events:
• Q3 2018 Earnings on 25th October 2018 Shopify released Q3 earnings. Revenue saw a 58% increase from 2017
Q3 levels rising to $270.1 million. Revenue from merchant solutions were up 68% to $149.5 which were driven
by a 55% increase in Gross Merchandise Volume (GMV) from the same period a year previous. Subscription
revenue growth was also strong up 46% from Q3 2017 this growth was driven from a growth of Monthly
Recurring Revenue (MRR – the number of subscriptions at the end of the period multiplied by the average
subscription fee pay for the period) growth of 41% to $37.9 million, MRR was made up of 24% ($9.2 million) of
Shopify Plus Subscriptions. Operating losses grow in percentage term over the same period 12 months ago
increasing from a loss of 7.4% to 12%. Net losses also extended from $0.09 per share to $0.22 per share in Q3
2018.
• Expansion of Shopify Payments now available in Germany making the inhouse payment system available in 10
countries.
• Growth of Shopify Shipping, Shopify Shipping now accounts for more than one-third of all shipping on the
platform allowing Shopify to profit from product shipping.
• Shopify Capital Growth, Merchant cash advances grew by 73% in Q3 2018 compared to Q3 2017.growing to
$44.1 million issued in Q3 2018
2.2 Company Strategies:
• International Growth will be a key focus for Shopify as previous Geographic Revenue Split
lacklustre growth in new markets has limited growth.
11%
International growth is key to the firm’s future success with it 5%
bringing an increasing share of the huge and fast-growing 7%
Asian retail market as well as allowing geographical 7%
diversification of revenue streams helping mitigate downside 71%
risk from the west. Increasing revenue from international
markets is also key as us merchants currently provide more USA UK Canada Australia Rest of t he W orld
revenue per merchant than their international counterparts. Source: Company data
• Shopify Plus will be another area of focus with the majority of
Shopify’s GMV coming from Shopify Plus and Advanced
Geographic Merchant Split
Subscription plans growth in these areas is key. 21%
• Ecosystem Growth through growth of the community app
development ecosystem is starting to pick up and Shopify want 7%
57%
to take fill advantage of the commission on the sale of these 7%
nearly 2500 apps 8%
• Merchant Growth continues to be a key focus for the firm with
USA UK Canada Australia Rest of t he W orld
the number of merchants over the period of 2017 growing Source: Company data
61% year over year.
2|Page2.3 Management:
Shopify’s management has a wealth of experience within both Management
technology and the online retail space. CEO and co-sounder Tobias Tobias Lütke Chief Executive Officer
Lütke is primarily a developer. He has little experience with managing Harley Finkelstein Chief Operating Officer
large companies although Harley Finkelstein COO does. The Russell Jones Chief Financial Officer
management team at Shopify value employee honesty and life values Craig Miller Chief Product Officer
using a system called trust batteries to measure ability to work Joseph Frasca SVP, GC, Secertary
together. The team at Shopify have less experience than other players Brittany Forsyth SVP Human Relations
in the online retail space although like most start-ups this team is Jean-Michel Lemieux SVP Engineering
growing and as such is gaining new and more business experienced David Lennie SVP Data and Analytics
members. We see no issues with Shopify’s management team or style
Toby Shannan SVP Support
and see it s on par with other start-ups in the industry. Source: Company data
Macro-Economic & Sector Outlook 3.0
3.1 Global:
With global expansion on the cards for Shopify and over half of Shopify’s revenue derived from GMV and thus the
success of their client’s business the success of the global economy is paramount to Shopify’s success. Our outlook on
global economic growth is as follows:
• Slowing Growth, we expect growth to slow up to 2020 with slack in both developing and advanced economies
being taken up. Both the IMF and World bank see the growth of world growth slowing. This slowing growth will
impact Shopify’s GMV growth as consumers reduce spending.
• Tightening monetary policy will affect all major economies with many major central banks retracting monetary
policy including the ECB winding down its asset purchase program as the global economy enters the later stage
of this cycle. Tighter policy will have a direct on Shopify making credit more costly potential reducing
attractiveness of cash advances. Although apart from the effect on the demand side this is likely to have little
effect on Shopify.
3.2 US:
The US market is key to Shopify making up 71% of their revenues in 2017. A strong US market is key to Shopify
maintaining its market position. The outlook for the US is as follows:
• Monetary Policy, over the coming years we’ll see a tightening of US monetary policy from the Fed. The current
outlook is 2.4% at the end of 2018 with projected rates for 2019 being 3.1% and 3.4% for 2020. We see these
policies as natural given the projections of unemployment under the natural rate. Although given potential
uncertainty about growth in the next two years we could see rate increases slow or become negative in 2020.
The fed is also unwinding its $4.5tn of QE.
• Growth, 2018 ‘s growth target was set at 3% with growth in the third quarter annualised at 3.5%. this growth
looks strong on the surface the growth was driven by the administration tax cut program boosting consumer
confidence to highs and increasing business investment. There are doubts among some that this growth is
coming to an end and although we believe we are coming towards the end of this market cycle this economic
cycle has more steam yet.
3.3 E-Commerce:
The Growth of E-commerce over the past decade has been immense. Giants such as Amazon, eBay and Alibaba have
dominated over these years with amazon now holding over 40% of all retail sales within the US.
3|Page• Future Growth of the e-commerce sector up to 2024 is expected to average around 10% per year although this
is likely to be much higher with the ever-increasing reliance on last minute shopping and technology. E-
commerce currently makes up 12% of US retail sales up from 3.5% ten years ago, this leaves huge room for the
sector to grow and with ever increasing integration of technology into daily life it seems highly likely that E-
commerce will overtake physical commerce within the next two decades.
• Advances in Technology is playing a huge role in the growth of e-commerce allowing firms to sell on multiple
different platforms with ease using a host of services allowing multi-channel sales. The increase in online social
presence makes advertising to a very specific and defined audience attainable to all businesses helping cut cost.
The rise of mobile shopping is also key to growth with around 60% of online sales made using a mobile device
allowing customers to shop anywhere.
Operations 4.0
4.1 Revenue:
Top line sales for Shopify are split in two distinct categories, Subscription Solutions (From Subscription Fees as well as
app, theme and domain name sales) and Merchant Solutions (From payment, shipping, capital solutions, transaction
fees, referral fees and sale of POS hardware.)
• Historical Revenue has been rapidly growing up 73% in 2017 to
Revenue Split
$673.3 million and forecast to be up 57% in 2018 with the
1,200
trailing 5-year growth at 904%. Revenue historically has been 1,000
Revenue (millions)
mostly made up of subscriptions revenue however this 800
changed in 2016 and is now at a 55/45 split between merchant 600
400
solutions and subscriptions solutions revenue. 200
• Forecast Revenue from our model is expected to continue this 0
2012 2013 2014 2015 2016 2017 2018
growth in the near term with revenue growth falling to 21% by Subscription Solutions Merchant Solutions
the end of the forecast period to 2024. We expect revenue Source: Company data
growth to be driven by merchant solutions which at the end of
the period would make up 63% of revenue. This change in Revenue Growth Forcast
revenue makeup from subscription to merchant solutions is 7,000
6,000
due to older Shopify client’s business growth leading to less
Revenue (millions)
112% 109%
5,000 95%
90%
subscription fees being paid in relation to the fees from 4,000
3,000
73%
57% 57%
services like Shopify payments and capital. This is driven
41% 37%
2,000 29%
21% 21%
through the growth forecast in GMV which we forecast to have 1,000
. 0
risen 800% from 2017 to 2024. Not an unreasonable growth
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Revenue Year over Year Growth Revenue
given the growth of the E-commerce sector and the pervious
Source: Company data
5-year growth of GMV of 1520%
4.2 Gross Profit:
Gross Profit margins have been steady for the previous 4 years with 2018 also looking to be around 56% given Shopify’s
Q3 full year guidance. Cost of good is made up of payments for domains, themes, credit and payment card fees, hosting
infrastructure and POS hardware. We forecast these costs to stay stable over the forecast period except for hosting
costs which we see decreasing from Shopify’s movement to inhouse hosting as opposed to third-party hosting solutions.
However, we see a slight fall in gross margin due to the movement of customers on to Shopify payments where we see
the margin being slightly slower than the current structure of third-party payment solutions due to visa, MasterCard
and Amex fees as well as the fees paid to Stripe the provider of the service. also, the margin on Shopify payments is
significantly less than that of subscription revenue which with the change in revenue mix we predict will again reduce
gross margin. This change in revenue mix however with increase bottom line profits with Shopify’s own payment
platform requiring less marketing and R&D than the use of third-party providers. We see Gross margin being around
52% in 2024.
4|Page4.3 Operating Profit:
Historical operating profit margins have been stable around -10% for the past 3 years and we see this continuing into
the end of 2018. Operating cost for Shopify consists of mostly sales and marketing, the growth of this cost is expected
to slow as Shopify become a more household name requiring narrower marketing to specific demographics. Also, the
growth of Shopify payments requires less marketing of third-party payment methods as well as greater adoption
requires less marketing for the in-house payment system. R&D costs for Shopify consist of software development. We
see this cost staying a large cost for the firm especially if app development is in housed. We see general and admin costs
staying around 10% of revenue for the projection period as the majority of these costs are linked to providing the
product and thus are a function of revenue. For the forecast period we see operating profits rising as revenue rises are
the rate of cost growth falls. We see operating profit going positive in 2020 and growing to $1.4b in 2024 representing
a margin of 23%
Margins 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Gross 79.9% 73.1% 58.8% 54.1% 53.8% 56.5% 55.6% 55.3% 54.7% 53.7% 53.4% 53.5% 52.4%
EBIT -6.4% -8.5% -20.6% -8.7% -9.5% -7.3% -10.2% -1.7% 5.7% 14.7% 19.4% 21.5% 23.4%
Net -5.2% -9.6% -21.2% -9.2% -9.1% -5.9% -7.5% 0.3% 5.4% 11.7% 15.0% 16.4% 17.7%
EBITDA -5.2% -9.0% -20.4% -9.4% -11.4% -9.8% -13.1% -3.9% 2.6% 10.2% 14.2% 15.8% 17.6%
Source: Company data, Personal Projections
4.4 Net Profit:
Other costs for Shopify are hard to predict, due to being Canadian the USD.CAD rate influences the repatriation of profit.
A 10% stronger CAD would have little effect on revenue and the cost of revenue as the origin and cost stay within the
country in which the sales are made however it would have a -5% effect on operating cost as these are mostly situated
in Canada. Interest income is expected to rise over the forecast period as receivables rise. Shopify is expected to begin
paying tax on incomes earned. The model takes a simple approach that Shopify will start paying the stated tax rate on
their filings of 26.5% as soon as profits are made. This is likely to be less true due to carried forward tax credits from
previous losses. Once going positive we see net income rising rapidly from $0.4M in 2019 to around $1bn in 2024.
5.1 DCF:
Valuation 5.0
5.1 DCF:
To gain a discounted cash flow our base case 6.1 financial situation was used. Assumptions are stated in the operations
section of this report and investment thesis. This DCF covers the 5 years preceding 2017.
DCF
($, Thousands) 2018 2019 2020 2021 2022 2023 2024
Net Income (79,327) 37,369 212,459 493,458 620,973 824,264 1,079,872
Plus: Depreciation and Amortization 24,533 34,442 47,864 62,472 78,931 96,778 115,898
Less: CapEX (28,803) (37,694) (46,895) (57,170) (66,943) (77,429) (88,679)
Less: Change In Working Capital 63,396 113,814 125,445 151,398 181,971 160,705 193,558
FFCF (146,994) (79,697) 87,983 347,362 450,990 682,908 913,532
Net Present Value of FFCF (136,484) (68,709) 70,429 258,179 311,235 437,591 543,518
Sum of PV of FFCF 1,415,759
PV of Terminal Value 15,277,267
Normal Discount Period 1 2 3 4 5 6 7
Mid-Year Conveention Method 0.5 1.5 2.5 3.5 4.5 6.5 7.5
5|PageImplied Share Price (Terminal Growth rate: 4%, WACC: 7.7%) Sensitivity Analysis Discount Rate (8.3% - 7.1%) and Terminal Growth Rate (3.4% - 4.6%)
Perpetuity Growth Method Termial FCF Growth Rate
PV of Terminal Value 15,277,267 3.4% 3.6% 3.8% 4.0% 4.2% 4.4% 4.6%
Source: Company data, Personal Projections
PV of FFCF 1,415,759 8.3% 118.54 123.15 128.17 133.66 139.68 146.32 153.68
Discount Rate
Implied Enterprise Value 16,693,026 8.1% 124.50 129.57 135.12 141.21 147.93 155.37 163.66
(WACC)
Less: Debt - 7.9% 131.00 136.61 142.76 149.55 157.08 165.46 174.86
Plus: Cash 243,421
7.7% 138.11 144.34 151.20 158.81 167.29 176.79 187.52
Implied Equity Value 16,936,447
7.5% 145.93 152.87 160.56 169.13 178.75 189.60 201.94
Fully diluted shares outstanding 106,647,222
Implied Share Price 159 7.3% 154.56 162.34 171.01 180.73 191.70 204.19 218.52
Premium / (discount) to current sha re 4% 7.1% 164.14 172.90 182.73 193.83 206.46 220.96 237.77
Source: Company data, Personal Projections
Source: Company data, Personal Projections
5.2 P/E:
• The Price of 160 gives Shopify a forward P/E in 2024 of 19x in line with other more developed companies in
the industry. (Due to the current undeveloped nature of this industry P/E is not a current helpful comparison
and EV/Revenue is a better metric.)
5.3 Comparative Valuation:
Market Data Revenue EBITDA Net Profit EPS
Company Name Ticker Price Market Cap EV YE 2017A YE 2018E YE 2017A YE 2018E YE 2017A YE 2018E YE 2017A YE 2018E
Salesforce CRM $ 139.24 $ 106.52B $ 93.31B $ 10,480.0M $ 13,234.3M $ 1,041.7M $ 3,087.5M $ 127.5M $ 846.4M 0.45 2.50
Workday WDAY 165.02 35.963 35.31 2,143.1 2,805.9 346.5 467.5 (320.9) (430.7) (1.59) (1.11)
ServiceNow NOW 180.85 32.43 27.99 1,933.0 2,611.4 409.0 673.7 (149.1) (33.7) 0.67 0.17
Square SQ 63.51 26.26 26.1 2,214.3 2,814.2 139.0 255.2 (62.8) 32.2 (0.05) (0.02)
Shopify SHOP 150.2 16.08 14.58 673.3 1,054.4 (66.4) (138.1) (40.0) (79.3) (0.42) (0.72)
Wix.com WIX 93.98 4.54 4.3 425.6 601.3 (25.8) 114.1 (56.3) (34.6) (0.98) (0.49)
Source: Company data, Personal Projections
EV/Rev enue EV/EBITDA
Company N ame Tick er YE 2 0 1 7 A YE 2 0 1 8 E YE 2 0 1 7 A YE 2 0 1 8 E
Direct Competitors Market Share
C o m p an y N am e N u m b er o f S it es % o f Mar k et
Salesforce CRM 8.9x 7.1x 89.6x 30.2x WooCommerce 1,012,624 29.23%
Workday WDAY 16.5x 12.6x 101.9x 75.5x
ServiceNow NOW 14.5x 10.7x 68.4x 41.5x Squarespace Online 679,188 19.61%
Square SQ 11.8x 9.3x 187.8x 102.3x Shopify 324,606 9.37%
Shopify SHOP 21.7x 13.8x - -
Wix.com WIX 10.1x 7.2x - 37.7x
WixStores 202,175 5.84%
Magento 147,415 4.26%
Hi g h 21.7x 13.8x 187.8x 102.3x MonsterCommerce 126,175 3.64%
Source: Datamyza.com
A vera g e 13.9x 10.1x 111.9x 57.5x
Low 8.9x 7.1x 68.4x 30.2x
Source: Company data, Personal Projections
• Multiples and Measures: due to undeveloped nature of this sector we don’t see P/E as a meaningful mertic
and thus have removed it from calculations. EV/Revenue is a more meaning full metric for this new industry.
We see historically a multiple of around 14x significantly less than Shopify’s current multiple. EV/EBITDA is
also not as important although we can see this falling significantly in forecasts for the whole of 2018 meaning
prices are beginning to fall inline with valuations for these firms.
• Target Multiple: currently Shopify’s Multiples are out of line with others in the industry, we list this as a major
investment risk below. This is highly concerning as there are currently concerns with inflation of share prices
in this sector and it appears that Shopify is leading the way.
Investment Thesis, Catalysts & Risks 6.0
6.1 Investment Thesis:
The previous research has led us to the conclusion that under are most likely scenario Shopify is a hold and until some
of the catalysis listed below come into fruition and believe that our price target of $160 is a strong marker for Shopify
to trade within 10% of:
• Comparative: with other firms in the industry having much lower multiples and financially speaking doing
better (profitable) than Shopify indicating that Shopify’s stock price has more room to grow would suggest
that we expect abnormally high growth in comparison to peers which we do not see given our model.
6|Page• Slowdown In US: With the prospect of a slowdown in US growth over the next few years it seems
unreasonable to state that Shopify will see significantly high growth to warrant a higher valuation given the
highly demand side and cyclical nature of their main revenue stream (merchant solutions) and it is driving
force GMV which in turn is driven by consumers ability to spend.
• Model: given our model we find it hard to get extra value from Shopify given the current financials. We don’t
see extra value over $160 per share without on the catalysis below. Given the current markets in which
Shopify operate we see little room for our model to expand revenue growth and with operating cost already
at our stated outlook which we feel is likely a best case it is hard to make an argument for value growth within
Shopify. Our terminal growth rate used was also optimistically high at 4% although due to the early
development of this market in its room to grow both domestically we feel this rate is justified.
• Movement to merchant solutions, we see the movement of Shopify’s revenue streams away from
subscriptions both beneficial and a potential risk. This risk is that becoming more linked to cyclical revenue
streams at this late stage in the economic cycle could tie Shopify to a reducing revenue pool. The benefit to
this revenue stream is that it grows with the client at a much better conversion rate than the increase in
subscription rates meaning if Shopify’s customers are succeeding so are Shopify.
• Asia, Asia’s nearing $1.5 Trillion e-commerce market is huge expansion potential for Shopify. With only 10.5%
of Shopify’s 2017 revenue coming from non-US Canadian Australian and UK sources Shopify has some catching
up to do which we see as good potential value for Shopify assuming they can crack the notoriously closed
Asian web platform market.
6.2 Catalysts:
• Asian markets, our model sees that Shopify’s exposure to the Asian market will grow over the coming years,
but we do not see a huge expansion with the Chinese market being difficult to penetrate for western
internet firms and other firms already dominating the remainder of Asia. However, if Shopify is successful in
increasing its Asian market exposure in the next 5 years beyond our prediction of 20% share of revenue for
the rest of the world then we see this a catalyst for extra growth and thus we see in this case a share price
of $180 - $190 being realistic.
• Use of Stored Cash, Over the last 4 years Shopify has gain large quantities of cash through issuance of share,
the vast majority of which has been placed in to marketable securities (mostly US treasuries and Corporate
bonds.) this cash has grown from $59m in 2014 to $938m in 2017 with it expected to be around $1.7b in
2018. We see huge potential for Shopify to utilise this cash for future expansion. The use of this cash is
undetermined, and this could be a catalyst for future growth. We however don’t wish to see Shopify
continuing to hoard cash although this is an attractive trait for a company at this stage in the economic
cycle.
• Inhouse Development of Platform Apps, we see huge potential in the app ecosystem on Shopify with it
growing from 1200 apps in 2015 to over 2500 in 2018. Currently Shopify takes commission of 20% on every
app sold, we see potential for Shopify to expand into first party apps and thus take 100% of the sale.
Although this may reduce the extensiveness of their current community. We see this as another revenue
stream and thus could provide extra value although the extent of this is questionable.
• Growth of E-Commerce, the model assumes a rate of growth in the E-Commerce industry of 10% per year
up to 2024. We do see some potential for this to be an underestimation of the true growth rate and that the
growth rate could accelerate over the coming years as more business is moving online it forces non-web-
based firms to migrate.
6.3 Risk:
• Market Risk, The biggest risk we see for Shopify is the current market risk stated earlier in this
report. With the risk of a slow down the first area to be hit by financial struggle is SME’s Shopify’s
7|Pagecore business. Although not generating the majority of GMV they grow into these larger firms and
growth through Shopify’s ecosystem is key to customer retention and growth.
• Competitors, Shopify has ever increasing competition, direct competition from firms such as
WooCommerce, Squarespace and Magento where Shopify holds the second biggest market share
based on number of websites at 10% with Square space being 2nd with 20% and Woo being top
with 30%. Shopify also faces competition with Amazon where business owner can’t set up a store
front but so have access to Amazon search results and exposure to their large customer base.
• Losing Large Clients, With Shopify advanced and plus customers making up the biggest percentage
of GMV losing these clients is a substantial risk. Large firms tend towards in-housing key business
areas to reduce exposure to third party risk as they grow this includes online stores ect, this risks
Shopify losing their clients just as the become cash cows.
• Movement to In-House Hosting, Shopify is currently looking to move hosting from a third party to
be in-house. In the long run this is a strong move developing the infrastructure for future growth
and mitigating third party risk although it comes with high costs and the risk of limiting growth due
to cost limitations and risking brand image given a systems failure. We see this as a small risk in
relation to Shopify’s core value.
Important Disclosures 7.0
Analyst Disclosure:
Neither I luke McCarthy nor anyone associated with the creation of this report certify that this equity report accurately reflects
my (our) current (as of date published) views about the subject security and issuer(s). that I (we) were in no way compensated
directly or indirectly in relation to the expressed recommendation.
Meaning of LMCR’s Equity Research Ratings:
The ratings given represent the change in the given equity’s stock price over a horizon of 12 months.
Buy: more than +25% Outperform: +10% to +25% Hold: +10% to -10% Underperform: -10% to -25% Sell: less than -25%
Disclaimer:
The information and views appearing in the above prepared report are prepared by Luke McCarthy. The data used in this report
are based upon analysis of sources considered to be at the time of publishing reliable, myself (Luke McCarthy) does not
represent that it be accurate or complete and should not be relied upon as such. This report is to be used as personal
information and I (Luke McCarthy) take no responsibility for ant losses incurred. The ratings and recommendations given in this
report may not be suitable to all investors and investment strategies. Investors should seek independent advice if needed. I
(Luke McCarthy) currently hold none of the above-mentioned security and have no intentions of purchasing said security within
7 days of the report release date stated above. I (Luke McCarthy) have no vested interest in the company reported above
neither do any members of family. I (Luke McCarthy) Take no responsibility for the actions of individuals with respect to the use
of the above given ratings and recommendations and as such cannot be held liable for any resulting losses. I (Luke McCarthy) do
not represent and am not a qualified finical analysis and as such information in this report should be used appropriately.
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