Shopify Inc.

Shopify Inc. (Shopify) provides a cloud-based, multi-channel commerce platform designed for small and medium-sized businesses. The Company offers subscription solutions and merchant solutions.

Why Investor Should Book Profit?

• Significantly Overvalued: Despite solid financial performance and consistent improvement in the financial profile of the company, we believe that the shares are significantly overvalued as compared to its peers. As from the TTM EV/Sales multiple standpoints, its shares are trading at a multiple of 47.6x, whereas the industry average multiple stood at 8.2x, which implies a steeply stretched market valuation, and consolidation could take place.
• RSI in overbought zone: The leading momentum indicator, 14-day RSI is hovering in a steep overbought zone at 76.15, which implies a potential price correction could take place from the current trading levels.

Stock Recommendation:

The stock made a handsome rally in the past as it is helping the businesses to come online amid the pandemic. The company is recording a continuous improvement in its financials over a period of time. We believe that all the positives are priced in at the current trading levels. Moreover, on the valuation front, the stock is trading at significantly stretched forward EV to Sales multiple of 35.4x compared to the industry (Technology) average multiple of 11.5x. Also, given the market uncertainties hovering above the global equity market, there could be some significant correction the SHOP valuation, if things turn wrong. Therefore, based on the above rationale and significant stretched valuation, we recommend a “Sell” rating on the stock at the closing price of CAD 1,844.67 on June 28, 2021.

1-Year Price Chart (as on June 28, 2021). Analysis by Kalkine Group

Lightspeed POS Inc

Lightspeed POS Inc. (TSX: LSPD) offers omni-channel commerce-enabling software as a service platform. The Company's software platforms provide its customers with functionalities to engage with consumers, manage the operations and accept payments.

Why Investor Should Book Profit in LSPD?

• Steeply Stretched Valuation: LSPD shares are trading at a steeply stretched valuation, from the TTM EV/Sales standpoints LSPD shares are trading at a multiple of 33.09x, whereas peer’s average multiple stood at 23x, implies a valuation premium of 40%.
• At the last traded price as on June 28, 2021, LSPD shares were hovering close to the upper Bollinger Band©, which is 2x deviation from the 20-day moving average. Moreover bands are also expanding reflects deviation from mean is rising and potential correction towards the 20-day SMA could be seen in near term.
• The leading momentum indicators, 14-day RSI hovering in an overbought territory at ~74, implies a near term price consolidation can be seen.

Technical Price Chart (as on June 28, 2021). Analysis done by Kalkine Group

Valuation Methodology (Illustrative): EV to Sales

Stock Recommendation: Despite 127% jump in the top-line from March 2020 to March 2021, the company losses at operating level are not narrowing, it has expanded from USD 20.48 million in March 2020 quarter to USD 43.75 million at the end of March 21 quarter. This shows that exponential growth in the topline is expanding losses and widening bottom line losses. Practically, the company is not generating value for its shareholders despite substantial jump in the revenue, instead lowering net worth of the company. Therefore, based on the above rationale and valuation, we recommend a “Sell” rating on the stock at the closing price of CAD 106.33 on June 28, 2021.

One-Year Price Chart (as on June 28, 2021). Source: Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.