Thread by @borrowed_ideas

1/ $SHOP 4Q'21 Update

Lots of SFN related questions on this call.

Narrative driven valuation is a double-edged sword; SFN-related chatter led to a huge rally not so long ago, and now it puts SHOP in a penalty box.

Here's my notes.

2/ SHOP's GMV and topline momentum continues to sustain far longer than anyone perhaps assumed 3-5 years ago.

2021 take rates, my go-to metric to assess upside here, was the highest in the last 5 years; although very gradual improvement, it's a step in the right direction.

3/ "More than 14,000 merchants on Shopify Plus with approximately 4,000 of these coming on in 2021"

"In 2021, nearly 600 million shoppers made a purchase from Shopify merchant, up nearly 31%
from 2020."

4/ Four key investment themes in 2022:

Building buyer relationships
Going global
Going from first sale to full scale
Simplifying fulfilments

5/ "More merchants benefited from these features with a number of locations subscribing to Point of Sale Pro nearly doubling in Q4 2021 versus the same period in 2020."

TikTok shopping (Aug'21), and TikTok marketing channel (Oct'21) were introduced.

6/ "In Q4, more buyers use Shop Pay to check out on Facebook and Instagram with sales volume growing 4x
quarter-over-quarter for Shopify and non-Shopify merchants."

"GMV through Shop Pay installments more than doubled quarter-over-quarter as did the number of repeat buyers"

7/ More context about the deals with JD marketplace, and product updates such as Shopify Balance and Shopify Capital

8/ SFN related explanations

SFN was launched in mid'19 and initial outlook was $1 Bn cumulative capex over 5 yrs. So far, $117 mn is spent.

Now Shop has more clarity and insight. New capex plan: $1 Bn additional capex in 2023-24

Goal is to reach 2-day delivery for 90% US

9/ App developer partners grew earnings on Shopify by 76% to $411 million, and # of app developer partners that had an app used by merchants grew by nearly 1/3 over 2020.

10/ How SHOP decides what to build on their own vs relying on the 3rd party ecosystem:

"If merchants need something more -- if most of the merchants need something most of the times, it got to the core"

11/ "Payments penetration of GMV was 51% versus 47% in Q4 2020 and up 2 percentage points over Q3 2021."

12/ "planet Earth has not made enough engineers to deal with the rapid digitalization that we've gone through with COVID and so on."- @tobi

Here's some recent relevant data I dug in. If you're still in college, you may want to respond to what the world is telling you.

13/ Outlook

Expects topline to decelerate from '21.

Q1 is likely to face the highest headwind and Q4 likely to post highest YoY growth in 2022

14/ Valuation

As I mentioned recently, SHOP is finally getting to valuation where things get interesting. Not cheap, but interesting. If it's around ~$500, we can probably call it cheap. I'm adding, but trying to be patient as well in case it does come to $500.

End/ My $SHOP deep dive (Apr'21): mbi-deepdives.com/shop

I'll cover $TRUP and $IAC in the next couple of days.

All my twitter threads: mbi-deepdives.com/twitter-thread…