Mad Hedge Technology Letter
April 22, 2020
Fiat Lux
Featured Trade:
(HERE’S A MINI AMAZON TO BUY)
(SHOP)
Tag Archive for: (SHOP)
This company is “handling Black Friday traffic every day” during the era of Covid-19 and it “won’t be long until traffic has doubled or more.”
Those were words right out of Shopify's CTO (Chief Technology Officer) Jean-Michel Lemieux while having one of the best seats to the biggest migration from offline to online in human history.
Investors are out there scrounging for the best coronavirus tech stocks, there never has been a time when losers lose more than ever, and winners win more than ever.
Take a look at Shopify (SHOP) if you want to associate yourself with the great coronavirus tech stocks.
The name does exactly what it sounds like and shares have almost doubled in the past 30 days to $600 per share.
In short, Shopify is a cloud-based commerce platform for small and medium-sized businesses in Canada.
Shopify was founded in 2004 by Tobias Lütke, Daniel Weinand, and Scott Lake after attempting to open Snowdevil, an online store for snowboarding equipment.
Lütke decided to do it himself after he was unable to find the right snowboarding gear online and launched it after two hasty months of development.
The platform grew wildly and was named Ottawa’s Fastest Growing Company by the Ottawa Business Journal in 2010.
Like so many other tech companies, the success was parlayed into more funding with $7 million from an initial series A round of venture capital financing in December 2010 and another Series B round raised $15 million in October 2011.
By 2014, Shopify supported 120,000 online retailers and was doubling revenue every year.
Most people don’t know this, but they have been public since 2015 and became so successful that Amazon integrated with them to allow merchants to sell on Amazon from their Shopify stores.
The stock exploded 10% on this news and they have been largely unstoppable as Canada’s go-to online platform even licensing out the software for online cannabis sales in Ontario when the drug was legalized in October 2018.
Shopify's software was also integrated with in-person cannabis sales in Ontario when it is legalized in 2019.
They have really touched on many bases and pivoted nimbly when they announced that 5,000 staffers would work remotely from home due to the global pandemic.
Shopify keeps marching towards profits and not even a pandemic can knock them off their perch.
Shopify has two routes of making money - subscription fees and transactional fees for services like payments or shipping.
Transactional fees are part of its merchant solutions segment and connected to merchants' success incentivizing merchants to sell more.
Growth has been breathtaking with compound 65% annual growth rate (CAGR) since 2015 and its merchant solutions segment growing faster at a 76% CAGR.
Shopify management projected first-quarter revenue to increase 38% year over year and 2020 full-year growth at 42% to $2.145 billion, but that was in February before they could take into consideration a world that involves online buying first.
59% of total revenue are fees tied to merchants' sales and volume has mushroomed.
The company will smash revenue projections and even though valuation is sky-high, the momentum suggests that shares will go higher.
Buyers should wait for the next big dip as the next entry point into Shopify.
Mad Hedge Technology Letter
December 4, 2019
Fiat Lux
Featured Trade:
(THE RUSH TO BUY ONLINE),
(AMZN), (WMT), (TGT), (W), (ETSY), (SHOP), (ADOBE)
There are several overarching seminal tech trends that I swear by.
The generational broad-based migration from analog to digital is a critical foundation that underpins the success of not only tech stocks as a unified sector, but the outperformance of the Mad Hedge Technology Letter.
You’ll be pleased to discover that 2019 is right on queue with digital sales exploding by the American consumer over the holiday shopping period and Americans ditching brick and mortar stores in droves.
Amazon (AMZN) broke records on Cyber Monday bragging that in terms of the number of items sold, it had its "single biggest shopping day."
Black Friday was a big success too selling “hundreds of millions" of products between Thanksgiving and Cyber Monday.
Consumers scooped up the toys, home, fashion and health, and personal care products on Amazon’s e-commerce platform.
Hot ticket items on Black Friday included Amazon's own Echo Dot and Fire TV Stick with Alexa Voice Remote, Play-Doh Sweet Shoppe Cookie Creations, Keurig K-Cafe Coffee Maker and LEGO City Ambulance Helicopter Kit.
Adobe (ADBE) Analytics estimates that the sales for the shopping bonanza easily eclipsed $29 billion, or 20% of total revenue for the full holiday season.
This is the aha moment when digital integration into shopping forced a paradigm shift to the business environment by capturing the focal point of American wallets.
Digital used to be the minority, but going forward, it will dictate the terms of engagement.
What does this mean in the bigger scope of things?
Mobile is the biggest winner of this brave new world.
Shopping apps gave consumers the platform to use their phones as a digital wallet.
Salesforce data discovered that Thanksgiving sales as a proportion of U.S. digital sales grew 17% and mobile sales rose 35% on Black Friday with 65% of total e-commerce executed through a mobile device.
“Black Friday broke mobile shopping records and even when shoppers went to stores, they were now buying nearly 41% more online before going to the store to pick up,” said Taylor Schreiner, principal analyst and head of Adobe Digital Insights.
Shopify (SHOP) did over $900 million in sales this year and 69% were from phones and only 31% from desktop computers.
Black Friday was "the biggest day ever for mobile," tracking $2.9 billion in sales from smartphones alone, or 39% of all e-commerce sales, a 21% increase year over year.
The data also showed that smaller e-commerce outfits had a harder time driving sales than large e-commerce platforms.
The network effect truly works both ways and the success of the biggest and best also correlated to a meaningful decline of physical shopping visit to stores of 6% on Black Friday.
According to The NPD Group's Holiday Purchase Intentions Survey, 20% of sales were picked up in the store. This click-and-collect business has been a huge winner for the likes of Walmart (WMT).
E-commerce leaders are having enormous success introducing omnichannel approaches to the selling channels.
The average order value on Black Friday rose 5.9% year over year to $168, a new record, in part because shoppers have become more comfortable buying expensive items online because the sales are even juicier.
Unfortunately, the rise in volume has meant lower margins.
Discounts averaged between 37% to 47% and home and consumer electronics products were popular.
With all the rumblings of tariff trauma and an approaching recession, the American consumer displayed robustness that largely met the consensus of analysts.
The takeaway is that e-commerce is as healthy as ever and should prolong not only the strength in e-commerce companies but the overall American economy.
The winners are the behemoths of Amazon, Target (TGT), Shopify, and Walmart. Shares should receive a moderate tailwind through the New Year.
Avoid smaller niche players like Etsy (ETSY) and Wayfair (W).
