With Solid Revenue and Good Margins, Shopify May Have Turned the Corner; FVE Stable at $45

Shopify reported third-quarter results that were ahead of our expectations from a revenue and operating margin perspective. The last time narrow-moat Shopify delivered such solid results was the second quarter of 2021. We are therefore left to wonder if the firm has turned the corner just as the broader economy faces the looming specter of recession. The lack of guidance from the company does not help raise our conviction level. The fact that incoming CFO Jeff Hoffmeister has been a prominent investment banker suggests Shopify will step up its acquisition efforts. These factors combined are consistent with our Very High Uncertainty Rating. We are maintaining our fair value estimate of $45 per share, (CAD 61, up from CAD 58 due solely to currency moves). We see upside to share from here but the high uncertainty would focus our attention elsewhere within software. We continue to believe that the Shopify Fulfillment Network is likely to gain significant traction with customers and along with continued penetration of other merchant solutions, should help drive strong growth over the next decade.