Shopify is the Fastest Growing SaaS Company Ever
E-commerce solutions company Shopify reported their fourth quarter and fiscal year 2018 earnings before the market on Tuesday. The stock initially dropped because of weak guidance and some missed estimates (which really doesn’t matter) before recovering in the afternoon.
Shopify is a high-flying stock with a nosebleed valuation. However, they have some chops to back up that valuation, because according to the earnings report they are the fastest growing Saas business of all-time:
“We made history in 2018: no other SaaS company has crossed the $1 billion-dollar revenue mark at a faster growth rate than Shopify has,”
No bones about it, that is an impressive statistic. Shopify has been growing revenues in the high double-digits for a few years now, with no signs of slowing anytime soon. Here are some of the highlights from today’s report:
Revenue in 2018 of $1.073 billion, up 59% Y/Y
Gross Merchandise Volume (GMV) of $41.1 billion in 2018, up 56% Y/Y. This is the total money flowing through the platform for the year.
Shopify Payments is now available in 11 different countries.
Shopify has hundreds of apps that give them a competitive advantage over other e-commerce players.
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They are still not profitable, and expect to lose $150 million in 2019. They have a market cap of $18.5 billion, giving them a price-to-sales (P/S) ratio of 17. I don’t know if any stock deserves a valuation that high, but if there was one that did I think Shopify would be at the top of the list.
What the Future Holds
One number that concerns me from the report is that marketing expenses grew 55% Y/Y to $350 million. The company is known for its click-baity ad campaigns, and I am unsure they could keep up this torrid sales growth without exorbitant spending. Other young companies like Tesla, Square, and Venmo have been able to grow by word-of-mouth and brand quality, something Shopify doesn’t seem to have.
Overall, this is another consistent report from this up-and-coming e-commerce platform. I actually was thinking of adding them to a digital B2B stock basket with other growing SaaS businesses like Twilio, MongoDB, and Square. There’s no doubt that Shopify is a rapidly growing business. The question investors must ask is: can they be a profitable one?
Disclosure: The author is not a financial adviser, and may have interest in the stocks talked about.