> Shopify is an insanely huge e-commerce platform (and a $100B company).
That's an interesting note. They have a $90b market cap, trading at ~53 times sales. It's one of the more extreme valuations I've seen in the last 25 years, including the dotcom bubble (and that's saying something with how overvalued everything cloud-related is today).
As one comparison for the absurdity, Yahoo during most of the height of the dotcom bubble, was trading for 30-50 times sales, growing sales faster than Shopify, and they were solidly profitable (Shopify has never earned a consequential profit in its history). That's how bad Shopify's present valuation is, to get good comps you have to reach into the dotcom bubble.
The market thinks they're Amazon-like. The problem is they've never demonstrated any great margins in their platform (despite 14 years and counting) and Amazon's big lift-off in their stock occurred solely due to the ability of AWS to generate immense operating income. Without AWS, Amazon eventually gets the sad multiples of a Target or Walmart on their retail business.
This is an obviously mistaken valuation riding one of the most overvalued markets in US history, one that will most likely brutalize investors that get in late. It's a classic example of how very inefficient and irrational the stock market can be in the shorter term. And no, that doesn't mean an investor should be the fool to step in front of the irrationality train and short it either (everyone here probably has heard the Keynes line about the market remaining irrational longer than you can remain solvent).
It'll take at least 10-15 years at a minimum for Shopify to grow into its present valuation, in the best case scenario, if everything goes perfectly and they some day find some margin in their business. If they eventually manage an enormous $2 billion profit ($1.7b in sales today ttm), they'll still have a 45 PE ratio at today's valuation. That's a prime market example of insanity.
eBay has a vastly superior business (in all regards, including its quasi-monopoly positioning and the tremendous profitability of ebay's platform), trading for a huge discount to Shopify, on the basis of the market's mistaken extrapolation about Shopify's future. If they're lucky, they'll one day be the size of eBay with a fraction of the profit margin (and of course eBay has a mere $29b market cap, 12x op income multiple; compression is a killer). I mention eBay (beyond obvious reasons), because Shopify is likely doing nothing more than pulling future returns forward to an extreme, as eBay once did (leading to a decade of stagnation in the stock).