This is a step-by-step stock review to answer the question, is Shopify (SHOP) stock a good buy?
This article will teach you how to use the 4Ms of investing. This will be a detailed walkthrough to show you how the 4Ms work and why they are important. If you are interested, you can log into Tykr to use the 4M Confidence Booster (Powered by OpenAI) which will allow you to complete a 4M Analysis in less than 60 seconds.
What are the 4Ms?
- MOS (Margin of Safety) – The MOS is the math part of investing which includes the Summary, Score, and MOS (Margin of Safety).
- Meaning – The meaning is the business model and how scalable the revenue streams are.
- Moat – The moat is how the business compares to other companies in the same Sector and Industry.
- Management – The management is the track record of the CEO.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
Table of Contents
The following links will direct you to key topics to help answer the question, is Shopify (SHOP) stock a good buy?
1. Shopify Company History
When investing in stocks, it’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.
- Founded in 2006: Shopify was established by Tobias Lütke, Daniel Weinand, and Scott Lake in Ottawa, Canada.
- Headquarters: Based in Ottawa, Ontario, Canada.
- Origin: Initially created to sell snowboarding equipment online, then evolved into a platform for creating online stores.
- Platform Launch (2006): Introduced a user-friendly e-commerce platform enabling businesses to create online stores.
- Rapid Growth: Quickly became a leading e-commerce solution for small and medium-sized businesses worldwide.
- Public Offering (2015): Went public, trading on the New York Stock Exchange and Toronto Stock Exchange under the ticker symbol SHOP.
- Global Expansion: Operates in multiple countries, supporting over 1 million businesses globally.
- Technological Innovation: Continuously innovates with tools like Shopify Payments, Shopify POS, and Shopify Plus for enterprise clients.
- User-Centric: Known for its easy-to-use interface, extensive app ecosystem, and excellent customer support.
- Omnichannel Solutions: Provides integrated solutions for selling online, in-store, and on social media platforms.
- Financial Growth: Demonstrates consistent revenue growth and profitability, driven by subscription fees and merchant solutions.
- Sustainability Commitment: Focuses on environmental sustainability, including carbon-neutral initiatives.
- Community Engagement: Actively supports entrepreneurship through educational resources and partnerships.
- Industry Recognition: Garnered numerous awards for innovation and leadership in e-commerce technology.
- Future-Oriented: Continues to expand its offerings and improve its platform to support the evolving needs of online merchants.
2. MOS (Margin of Safety)
When investing in a company, the first step is to look at the financials. Fortunately, Tykr does this for us automatically. The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make.
- Summary: watch
- Score: 67/100
- MOS: 1%
To see the most up-to-date Summary, Score, and MOS, please log into Tykr.
3. Meaning
When investing in a company, it’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Here is how Shopify (SHOP) makes money:
- Subscription Plans: Earns revenue by offering tiered subscription plans for its e-commerce platform, including Basic, Shopify, and Advanced plans.
- Transaction Fees: Makes money from transaction fees on sales made through its platform, especially when merchants use third-party payment providers.
- Payment Processing: Generates income through Shopify Payments, its integrated payment gateway, by charging processing fees.
- App Store: Gains revenue from its app marketplace, where third-party developers sell apps that enhance Shopify stores.
- Themes: Sells customizable themes for online stores, earning from one-time purchases or subscriptions.
- Point of Sale (POS) Systems: Earns from selling POS hardware and software solutions for physical retail stores.
- Shipping Solutions: Makes money by providing discounted shipping rates and logistics services to merchants.
- Capital: Offers Shopify Capital, providing loans and cash advances to merchants, earning through repayments with interest.
- Advertising: Gains revenue from advertising services that help merchants promote their products.
- Enterprise Solutions: Provides Shopify Plus, a premium platform for high-volume businesses, earning through higher subscription fees and additional services
Here are a few of the other companies that Shopify (SHOP) has acquired over the years. This is important because a company will use a “Buy before build” philosophy to go to market faster and add additional streams of revenue. A company with more revenue streams has a more stable business model. Keep in mind, that most companies don’t build new software because it takes too long to go to market and generate revenue.
- Remix
- Deliverr
- Dovetale
- Donde Fashion
- Primer Supply
- 6 River Systems
- Strategic Growth: Led Shopify’s rapid expansion to become a top e-commerce platform.
- Market Leadership: Positioned Shopify as a leader, helping merchants start and grow businesses.
- Revenue Growth: Achieved consistent revenue growth, boosting financial success and shareholder value.
- Product Innovation: Launched new products like Shopify Payments, Shopify Capital, and Shopify Plus.
- International Expansion: Increased global presence and revenue from international markets.
- Partnerships: Built partnerships with Facebook, Google, and Amazon for more marketing and sales channels.
- Support for Small Businesses: Supported small businesses with the Shopify App Store, resources, and events.
- Sustainability Initiatives: Committed to sustainability, carbon neutrality, and renewable energy.
- Corporate Culture: Promoted a positive culture focused on innovation, inclusivity, and well-being.
- Recognition and Awards: Earned many awards for leadership, innovation, and workplace culture.
6. 4M Score
All of our homework on this company leads up to the 4M Score. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the Meaning, Moat, and Management. If all 4Ms pass, we should have high confidence in buying this stock.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
👉 The 4M Score of Shopify (SHOP) is 55/100.
To see the most up-to-date 4M Score, please log into Tykr.
7. Is Shopify (SHOP) stock a good buy?
Some of the top questions investors can have is Shopify (SHOP) stock a good buy or should I buy Shopify (SHOP) stock?
Investing in Shopify can be a smart move. Shopify is a leading e-commerce platform, empowering millions of businesses worldwide. With its user-friendly interface and powerful tools, it simplifies online selling. Shopify’s strong growth potential is driven by the shift towards online shopping, increasing its market share. The company’s innovative solutions, like payment processing and shipping services, enhance its appeal. However, competition is fierce, and economic downturns can impact e-commerce spending. Despite this, Shopify’s consistent revenue growth and expanding ecosystem make it a compelling investment. Always consider market conditions and consult a financial advisor.
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To truly know if Shopify is a good stock to buy or sell, we recommend you log into Tykr. Within seconds you can see the Summary, Score, MOS, and 4M Score.
If you found this stock review interesting, you may also like this review on AMC.