I keep a list of 16 quotes on a piece of paper taped to my wall. They rarely change.

They shape how I invest every day... & they keep me focused & humble.

Here they are. 🧵

1. "Everyone has the brainpower to make money in stocks. Not everyone has the stomach." -- Peter Lynch 2. "He who lives by the crystal ball will eat shattered glass." -- Ray Dalio

Everything you need to know about $SHOP's Investment Case, Prospects & Risks: 1. Introduction

The year was 2006. A passionate coder by the name of Tobias Lütke wanted to find a new snowboard online. While sifting through options, frustration set in as a seamless ability to locate compelling products simply did not exist. Determined to fix this, Lütke embarked on a journey to build his own online snowboard shop.

Some 17 years and $60+ billion in market cap later, that idea would blossom into the foundation of an online store builder for any merchant wanting to run a business. What started as a singular dedication to remove snowboard purchase friction has transformed into a core mission to tear down the barriers to entrepreneurship for businesses of all sizes.

Lütke set out to trail-blaze a means to “arm the rebels” with all needed commerce tools -- all under one roof, all with one interface and all hassle-free. This work gave way to the birth of what he hopes will be a “1,000-year company” and what he calls “the best idea he’ll ever have.” It gave way to Shopify.

Here, I will explore all there is to know about Shopify’s business model and investment case -- the good and the bad. After finishing this article, you will be an expert on the company and will be able to answer virtually any question thrown your way. More importantly, you’ll be able to assess new developments from an informed position. We’ve read every report, every earnings call, every transcript, every leadership interview and every single piece of relevant information that I could find. We’ve condensed it down into an intricately synopsized view of Shopify’s business, prospects and risks. This is a real deep dive. I hope you appreciate it as much as I enjoyed creating it and I encourage you to share it far and wide. Let’s begin.

2. Basics

2a) Product Philosophy & General Differentiation

Shopify makes it easy for merchants -- large and small -- to thrive online with near-endless scalability. It provides the support, integrations, and ease of use to ensure businesses have access to any & all needed functions across their daily operations. These tools are readily available and deployable on the Shopify Admin for an overarching view of a business across all channels of selling. The Admin is the back-end that unites all disparate areas of business into a perfectly harmonized birds eye view of everything that matters to a merchant. This allows for more effective and contextualized decision making and enables those decisions to be pushed to all selling surfaces where a merchant presides. Importantly, decisions are easily synced with the front-end (what the consumer sees) in a way that always reflects their own brand.

Shopify’s general product categories are meant to remove pain points associated with enterprise maintenance and growth. The more headaches it solves, the more valuable it becomes. It obsesses over being a merchant’s “more important piece of software” by facilitating powerful ease of use. Specifically, its general product categories are split into two well-defined buckets: Subscription Solutions and Merchant Solutions.

It does serve many large enterprises, but the suite and mission were originally incubated for smaller merchants to offer them the same enterprise-level utility previously reserved for the behemoths.

Shopify’s unique value proposition comes from a few places. First, it boasts the scale-based benefits of selling through an aggregated marketplace while granting complete authority over brand and data. Merchants enjoy a win-win not typically available: More demand and total control over customer relationships. No longer must a business choose between one or the other. Merchants get it all while enjoying several unique perks that Shopify’s economies of scale (10%+ share of U.S. e-commerce volume) allow. Why does this matter? Marketplaces routinely withhold consumer data and compete with successful products via white-labeled knockoffs. Shopify doesn’t and, in turn, avoids a real conflict of interest while building trust.

Ensured scalability guarantees that merchants can handle holiday spikes and flash sales with confidence that soaring volume will not crash the site or foster latency. Competing web builders deal with frequent crashes which is actually a material source of lead generation for Shopify.

Singular interoperability is another real selling point. Because all Shopify products tie perfectly back to a centralized Admin, the tools are cohesively amassing data to make all products work better together than they do in isolation. More relevant data means less guessing and more effective strategizing. For a specific example, demand data can be used to more accurately guide inventory reordering and marketing investments. It calls this product silo unification its “Commerce Operating System.”

Furthermore, Shopify features a light-weight suite of Application Program Interfaces (APIs) providing seamless integrations between all Shopify apps as well as 3rd party apps (more later).

Shopify intentionally designed its business to ensure it only does better when its merchants sell more. This selling translates into more gross merchandise value (GMV) on which Shopify commands a take rate. So? It is solely focused on helping merchants thrive. That’s why it never knocks off a product like Amazon or Costco and never opaquely siphons off needed customer insights for itself. There’s no reason for Shopify to do so which is the beauty of this model.

2b) Developer Partner Philosophy

The breadth and extensibility of the firm’s product suite relies on a vibrant community of developers motivated to build in Shopify’s Developer Environment. These partners round out Shopify’s offering with niche tools to ensure merchants can have whatever they want, however they want, and in a simplistic manner.

“Partners make Shopify better by extending our API functionality so merchants can customize stores to meet unique needs.” -- President Harley Finkelstein

In terms of what Shopify offers itself vs. what it uses developer partners for, there’s an easy rule of thumb. If the use case is needed by most merchants, Shopify will build it. Less commonly used software is usually delegated to partners. This delegation not only extends the tooling that Shopify can provide, but it also serves as a strong source of referral-based lead generation to reel in new merchants.

To help partners sell more through Shopify, the company debuted “Built for Shopify” in 2022. This program comes with a slew of new tools and authorizations to craft developer apps in ways that “look and perform like they’re natively part of the overall platform.”

It’s clear that Shopify fixates on being a rewarding place for these developers to work. Specifically, its partners make $7 in revenue per every $1 that Shopify collects. As of 2022, Shopify developers earned 1.5x more than Apple developers and 4x more than Google developers for the same amount of work.

Unsatisfied with this tangible edge, Shopify doubled down. In August 2021, it removed all revenue share for developer application and theme sales for their first $1 million in revenue. This figure resets annually and means most ecosystem partners pay nothing in app store fees. Quite the refreshing dichotomy vs. Apple and Google. As part of this news, Shopify lowered its take rate on revenue beyond the first million from 20% to 15%. The glass half full view of the change is that Shopify is deepening the value that it offers talented, scarce software engineers to augment the quality of its platform. It’s better incentivizing them to build integrations and use cases for its ecosystem vs. others. The glass half empty view is that this is a necessary move to better compete with other app stores to win developer time and attention. There’s likely truth to both arguments.

While Shopify readily caters to and supports its vibrant partner network, it can be a vicious competitor when need be. It has shown a willingness to cut ties with underperforming partners and to vertically integrate services that it thinks it can do better. For example, in the last few years, it ended its relationship with Kabbage to internalize more of its loan suite and moved on from Mailchimp as it realized it could deliver better marketing tools to merchants on its own.

Snapshot of $META's Mostly Positive Quarter: Had to double & triple check to make sure Family of Apps EBIT margin actually came in at 51.5%.

That + the 2024 expense guidance.

Strong. 😎

When to sell a stock is an abstract concept.

Ask 5 different bright people, & you'll get 5 different answers.

It comes down to your personal approach, risk tolerance & style.

There is no 1 fits all approach...

But here's a thread on the approach that fits me: 1a. When to Sell?

We constantly discuss fundamental research as the basis for justifying an investment. But when is it time to sell?

While the answer to this question is highly subjective, we do have our opinions which we will briefly share in our typical long-term investing point of view.

Picking stocks can be so rewarding.

But knowing where to conduct research can be overwhelming.

Building a foundation of affordable resources to expedite this research helps mightily.

I’ve spent countless hours toying with products to hone in on my favorites.

Here they are: 1. Finance & Accounting Basics

New to investing? Welcome!

Financial valuation & accounting are vital concepts to learn.

World-renowned professors from schools like @UMich & others teach the concepts online... at your pace... for FREE.

Emulate my Finance degree from a couch.

Mega-Cap Tech Earnings Sparknotes:

1. $AMZN

a. Fulfillment
- 50%+ of Prime Member orders fulfilled same or next day in 60 largest U.S. markets
- 2Xing footprint of small warehouses following service & cost benefits realized.
- 60% of sales from 3P sellers for new record (higher… https://t.co/09casgTEVAtwitter.com/i/web/status/1…
2. $MSFT

a. Cloud
- Workload optimization ongoing but did not worsen Q/Q.
- Won KPMG cloud contract.

b. AI
- Azure AI 100 new customers/day
- 27k customers using GitHub CoPilot +100% Q/Q
- CoPilot to be infused across all products.

c. Apps
- Took share in all business apps.
-… https://t.co/P5dNYjTjzXtwitter.com/i/web/status/1…

A thread on $PYPL's Bull Case, Prospects & Risks:

1. Introduction

1a. PayPal & Checkout Basics

$PYPL grew famous for its easy-to-use online checkout button which allows for the side-stepping of manual data entry to juice shopper conversion. The button was so effective that… https://t.co/2uObgQwWMhtwitter.com/i/web/status/1…
2. Branded Checkout

2a. How it Wins in Branded Checkout

Today, PayPal is the leader of merchant checkout adoption, boasts more than 400 million total accounts and has nearly 100 million monthly active users (MAUs). This is the bread & butter which won’t change. In a space with… https://t.co/R8e6eoNHqutwitter.com/i/web/status/1…

I keep a list of quotes on a piece of paper taped to my wall.

These iconic quotes shape how I invest every day.

They keep me focused. They keep my hungry. They keep me humble.

Here they are. 🧵

1. "He who lives by the crystal ball will eat shattered glass." -- Ray Dalio 2. "Everyone has the brainpower to make money in stocks. Not everyone has the stomach." -- Peter Lynch

The investing world loves its lingo & acronyms.

& learning that language can both save a lot of time and make us better investors.

Luckily, doing so is easy.

Focusing on the income statement specifically…

Here's a 🧵 on language, what it means & why to care: 1a. Basics

An Income Statement depicts a firm's financial results over a finite period of time (often by quarter or year).

It offers a sense of a firm's demand & profitability.

& that data (along w/$ pile) can also give us an idea of future fundraising needs.

Let’s begin!

$SHOP Q4 Snapshot -- Powered by @MasterworksIO: Can't call it a perfect Q.

Can call it a very solid Q.

Margins ahead of schedule & OpEx growth to continue to slow throughout 2023 for more expansion.

Call at 5:00. Excited to publish my review.

If you find this valuable, a like/comment/RT would be appreciated.

$NFLX Q4 Earnings Snapshot: Notes from the shareholder letter on results:

1) FXN revenue growth was 10% YoY.
2) Average revenue per member growth of 5% YoY FXN missed 6% FXN guidance.
3) Large subscriber beat via "successful content slate."
4) Margins aided by "slower than forecasted hiring."

Understanding the cash flow statement is vital for investors.

Luckily, it’s just a bunch of arithmetic & lingo.

Once you learn it, it’ll feel easy.

Here’s a short thread on the cash flow statement, what to know, where to focus & why to care: 1. Introduction:

The Cash Flow Statement is comprised of three sections:

1) Cash flow from operations (CFOp)
2) Cash flow from investing activities (CFI)
3) Cash flow from financing activities (CFF)

Let’s briefly review all three.

I keep 14 quotes on a piece of paper taped to my wall.

These iconic quotes shape how I invest every single day.

Here they are. 🧵 1. "He who lives by the crystal ball will eat shattered glass." -- Ray Dalio

News of the Week -- Powered by @SvvyTrdr:
1) $SOFI -- Crypto & Student Loans
2) $SHOP -- Black Friday Stats
3) $LULU -- Black Friday Hint
4) $RVLV -- Investor Conference
5) $OLO -- New Client & an Accolade
6) Cannabis
7) Macro Data & Context
8) My Activity
stockmarketnerd.substack.com/p/news-of-the-… Next week I have $CRWD earnings.

Will also be covering the following non-holdings: $ZS, $WDAY, $CRM & $VEEV.

I have room for 1-2 more so feel free to comment with requests.

A like/comment/share would be appreciated if you found this article valuable! If not, no worries. 🙂

Market pullbacks test conviction unlike anything else.

We learn the most about ourselves when things get the toughest.

My 8, not-so-secret weapons for remaining calm amid hectic markets: 1. A full Understanding of the Business

Company developments are frequent.

Understanding a firm's prospects & RISKS is the only way to gauge what those developments mean for our holding...

& the only way to truly understand how the risk/reward has changed.

News of the Week:
1-3. $DUOL $LMND $OLO $NNOX -- Earnings Reviews
4. $SOFI -- Student Loans
5. $TTD -- 2 Notes
6. $META -- Painful Rightsizing & TikTok
7. $SHOP -- SFN
8. @FTX_Official Ripple Effect
9. Cannabis Midterm News
10. Macro (👀🙂)
11. My Activity
stockmarketnerd.substack.com/p/news-of-the-… In case you missed it, I also published $TTD & $UPST earnings reviews (along with a lot more 1-pagers from firms like $PLTR & $RBLX on the Twitter feed.

stockmarketnerd.substack.com/p/the-trade-de…
stockmarketnerd.substack.com/p/upstart-q3-2…

6 signs that inflation has peaked... a thread: 1. The Food & Agriculture World Food Price Index has fallen for 6 straight months.

Every major category within the index continues to see material price declines.

Bloomberg's commodity index (includes a lot of food items) is also well off of 52 week highs.

The investing world loves its lingo & acronyms.

& learning that language can both save a lot of time and make us better investors.

Focusing on the income statement specifically…

Here's a 🧵 on 🔑 language, what it means & why to care: 1a. Basics

An Income Statement depicts a firm's financial results over a finite period of time (often by quarter or year).

It offers a sense of a firm's demand & profitability.

& that data (along w/$ pile) can also give us an idea of future fundraising needs.

Let’s begin!

News of the Week:
1) $CRWD -- Channel Checks
2) $TTD -- Forrester
3) $META -- Hiring & Product
4) $LULU -- Studio & $NKE
5) $SHOP -- POS Go
6) $SOFI -- Galileo, APY etc.
7) $PYPL -- $AMZN
8) $NNOX -- FDA
9) $MTCH -- COO
10) Crazy Week in Macro
11) Activity
stockmarketnerd.substack.com/p/news-of-the-… Will be publishing an income statement thread tomorrow diving into all of the lingo & acronyms (not just GPM & NI) tomorrow.

$SHOP deep dive & $ABNB intro coming along.

A like/comment/RT would be appreciated if you feel inspired to do so.

Happy weekend!

Let's normalize talking about failed investments.

None of us come remotely close to perfection... Myself included!

No point in pretending we do. We learn more from losers anyway.

7 of my failed investments & what I learned from each: 1a. $TDOC -- What Went Wrong

The $LVGO buy didn't provide enough differentiation vs. point solutions like I'd hoped.

I discounted integration, execution & balance sheet risks too heavily.

I tolerated signs of underperformance (slowing chronic care) for too long.

I built a 10,500+ subscriber free stock market newsletter in a year...

With a 58% open rate.

I spent $0 on marketing.

Annualized revenue just crossed 6 figures.

Here are 11 things I learned along the way about how to sustainably grow: 1. Write about what inspires you.

Newsletters are labors of love.

It takes discipline to consistently put out content.

& consistently putting out content is a pre-requisite for building a loyal subscriber base.

It's easier to do that when you enjoy the topic & writing.