RE:P/E Ratio - 273 TodayBertanderson wrote: I've been through the 2000 tech bubble correction. During hard times, these so called growth stocks get hit the most, regardless of forward earnings or the hope for a steady economy which we are far from stating. Let's be realistic, inflation is going to take time to control and we don't know how these rate increases will play out. Therefore, it is more likely than not, that people will be jumping from the high risk stocks like Shopify. If a more realistic P/E is 27, that is a divided by 10 reduction in the current price of Shopify stock or down to $47.48. It's a very painful decline that could occur over the summer. I do believe that in the long run, this company will be solid but it could be a few painful years before we see that return to those levels.
Good points Bert...
Declining real incomes due to inflation is taking a bite out of retail sales - WMT and TGT are the canaries in the coal mine. Seems to me that the market will need to recalibrate its estimates on growth and I agree with you that high P/E companies will be hit harder than average.
That said, the market will get through this inflationary period and smart investors will do just fine and this will be true for SHOP in this regard.
What is more difficult to get past occurs when a company makes an ill-advised purchase/acquisition. It is far too early to gauge whether the purchase of Deliverr will work out or not. But what we do know is that it was an expensive purchase and if doesn't work out, it will be difficult for SHOP to recover and so this is a big risk hanging over the company - hence the discounted SP.
The jury is still out on this. I for one am in the camp that it was not a good move and there were better, cheaper, safer ways to meet the intended objective. I have good friends who think the opposite and all of us worked on The Street during our working lives and we know this world inside out.
One of the reasons I am not confident in the acquisition goes back to some advice my Dad gave me when I was a kid "a hundred years ago". I came home one day with a bloody nose and my Dad asked me what happened. I told him I got into a fight with someone bigger than me. My Dad's advice? - "Don't pick a fight unless you are confident that you can win". My fear is that just like I got my bloody nose, so will SHOP picking a fight with AMZN.
As they say....time will tell. In the meantime, I am putting my money elsewhere until the answers to my questions become clearer. If that means I will have missed an opportunity, I will add it to that long list..lol - but IMO...better safe than sorry