SHOP, Why Their 32 P/E Ratio Is False And Its Actually Over 250
At first glance, Shopify seems to be at a Undervalued Price Point. They have huge growth, crazy Net Incomes, Profitability, and an Under 35 P/E ratio.
However, taking a look deeper into their Financials, Shopify's P/E ratio is actually much more than 250, which is almost 10x the P/E Ratio given on many brokerages.
So What Gives?
Most of Shopify's Net Income is from their "Equity Investments" NOT SHOPIFY/THEIR PLATFORM. In fact, Shopify made $1,340.8 Million ($1.34 Billion) in Net Income from these Equity Investments. Their actual adjusted Net Profit (Without Equity Investments) is, $102 Million. This means that over 90% of Shopify's "Net Income" is actually from their "equity investments".
These Equity Investments are AFRM and GLBE, both of these stocks are down heavy from their 52 week highs, which represents Shopify also losing lots of money. Currently, Shopify owns around 20+ Million Shares of Affirm (AFRM) and a million shares of GLBE. These shares both lost SUBSTANTIAL Amount of money since last quarter. @ IPO AFRM was trading at $117 which represented $2.34 Billion worth of Shares that Shopify owned, at the 52 Week high these shares became worth around $3.6 Billion, now Shopify's AFRM shares ,which is currently trading at $63, are only worth $1.3 Billion, representing a $1 BILLION LOSS in Share Value from the IPO. This doesn't include their substantial loss in GLBE, which is down almost 60% from its 52 week highs.
Once earnings comes rolling around, Shopify will have to report their substantial loss on these AFRM and GLBE shares, which could push the Company into being very unprofitable for the Company. The market today completely slaughters stocks that are deemed unprofitable and overvalued. The market is punishing stocks and once investors realize that Shopify's PE Ratio is actually WELL OVER 250, and that they aren't as profitable, the Stock could have a heavy dump on Earnings. Very few investors know about their heavy losses on AFRM, and GLBE.
Shopify on earnings will be very interesting, they will not have an overall positive Net Income from these investments. If Investors notice their heavy loss on AFRM and GLBE, the Stock could sink, and it's possible to see SHOP @ $700-$520 given how people view it.
However, taking a look deeper into their Financials, Shopify's P/E ratio is actually much more than 250, which is almost 10x the P/E Ratio given on many brokerages.
So What Gives?
Most of Shopify's Net Income is from their "Equity Investments" NOT SHOPIFY/THEIR PLATFORM. In fact, Shopify made $1,340.8 Million ($1.34 Billion) in Net Income from these Equity Investments. Their actual adjusted Net Profit (Without Equity Investments) is, $102 Million. This means that over 90% of Shopify's "Net Income" is actually from their "equity investments".
These Equity Investments are AFRM and GLBE, both of these stocks are down heavy from their 52 week highs, which represents Shopify also losing lots of money. Currently, Shopify owns around 20+ Million Shares of Affirm (AFRM) and a million shares of GLBE. These shares both lost SUBSTANTIAL Amount of money since last quarter. @ IPO AFRM was trading at $117 which represented $2.34 Billion worth of Shares that Shopify owned, at the 52 Week high these shares became worth around $3.6 Billion, now Shopify's AFRM shares ,which is currently trading at $63, are only worth $1.3 Billion, representing a $1 BILLION LOSS in Share Value from the IPO. This doesn't include their substantial loss in GLBE, which is down almost 60% from its 52 week highs.
Once earnings comes rolling around, Shopify will have to report their substantial loss on these AFRM and GLBE shares, which could push the Company into being very unprofitable for the Company. The market today completely slaughters stocks that are deemed unprofitable and overvalued. The market is punishing stocks and once investors realize that Shopify's PE Ratio is actually WELL OVER 250, and that they aren't as profitable, the Stock could have a heavy dump on Earnings. Very few investors know about their heavy losses on AFRM, and GLBE.
Shopify on earnings will be very interesting, they will not have an overall positive Net Income from these investments. If Investors notice their heavy loss on AFRM and GLBE, the Stock could sink, and it's possible to see SHOP @ $700-$520 given how people view it.
Comment:
Can't believe how accurate I was wow!!!