Shopify once again blew away expectations!

May 3rd, 2021 Comments off

Shopify Inc. (NYSE: SHOP) released its Q1 2021 earnings and once again blew away expectations!

Quarterly revenue jumped 110% year over year to $988.6 million.

Subscription revenue came in at $320.7 million with growth accelarating to 71%

Merchant solutions revenue was $668 million with growth of 137%

The gross merchandise volume (GMV) which is the amount of all sales of their merchants over the platform increased an awe inspiring 114%, to $37.3 billion.

Operating income for Q1 2021 was $118.9 million, or 12% of revenue,

Net income for Q1 2021 improved substantially to $1,258.4 million, or $9.94 per diluted share, compared with a net loss of $31.4 million, or $0.27 per diluted share, for the first quarter of 2020.

The balance sheet is rock solid with $ 7.87 billion in cash, cash equivalents and marketable securities.

These numbers show that Shopify’s growth was once again fueled by digital commerce tailwinds caused by the pandemic.

Therefore Shopify keeps the outlook for 2021 cautious as this pandemic will not continue forever.

But rest assured Shopify still has a lot of growth lying ahead.

International expansion outside Canada and the US is just starting and they invest heavily to expand their logistics network, payment solutions and other technological improvements which will help their merchants.

So even after the incredible runup of Shopify’s stock over the last couple of years, Shopify still remains a “Buy”!

Markel reports improved Q1 2021 results!

April 30th, 2021 Comments off

Earned premiums grew 13% to $1.5 bil coming from new business and more favorable rates.
The combined ratio for the first quarter was 94% which is very good as it still includes 5% from losses and loss adjustments from a winterstorm and from Covid19.

Net investment gains were driven by strong equity market conditions.

“Our first quarter results reflected strong, profitable growth across our underwriting operations globally, as we executed on our strategic plans to drive market leadership in key insurance product lines, while maintaining our focus on increasing operational efficiencies” said Thomas S. Gayner and Richard R. Whitt, Co-Chief Executive Officers.

Markel’s stock closed yesterday at $1’174 which translates into a price/book ratio of 1.3
In today’s environment it should be considered a fair price.

We should not forget that for insurance companies it is nearly impossible to earn good interest amounts and for Markel Ventures it is difficult to find good companies to acquire at acceptable prices. Therefore we cannot expect a higher share price!

Shopify’s FY and Q4 2020 results just blew away expectations!

February 19th, 2021 Comments off

Only a few people expected less:

Shopify Inc. (NYSE:SHOP) released FY and Q4 2020 results that beat expections!

Reported revenue in Q4 jumped to $978 million, up 94% year over year.

Adjusted net income came in at $199 million which translates into adjusted earnings per share that soared 198% to $1.58.

Primarely those results were driven by “merchant solutions” revenue that jumped 117% to $698 million year over year in Q4 but also “subscription solutions” revenue grew an impressive 53% to $279 million.

Operating margin in FY 2020 for the first time swung to 3% from a loss and the sales / free cash flow margin came in at 13%.

And all this happened while Shopify continous to investing heavily in its future!

Shopify continued to build out its “Shopify Fulfillment Network”. 52% of eligible merchants in the United States and Canada already utilized Shopify Shipping in the fourth quarter of 2020.

They launched the all-new Shopify POS, a faster, more intuitive, and more scalable POS software designed to meet the needs of the more complex Brick-and-Mortar retailers and expanded Shopify Payments and the accelerated checkout Shop Pay.

Shopify’s stock was down after releasing these results, because Shopify tried to dampen highflying expectations for FY 2021:

“… the ongoing shift to ecommerce, which accelerated in 2020, will likely resume a more normalized pace of growth.”

But don’t forget that Shopify the past years has always been prudent with its outlook.

Shopify certainly has a bright future given the rapid change of commerce which will continue and the shift to ecommerce accelerated in an unprecedented way by the pandemia which will go on in a more normelized way.

But Shopify’s stock valuation reflects all these optimistic assumptions.

The stock trades at a price/sales ratio of about 56 and a mind blowing price/free cash flow ratio of more than 400!

But Shopify remains the top dog in an at least $78 billion small- to medium-sized business market and we all know how profitable dominant software provider can become over time!

Shopify remains a “buy” whenever there is a pullback in the market!

Markel reports good FY 2020 results!

February 6th, 2021 Comments off

Markel released FY 2020 results!

At speciality insurer Markel Corp. (NYSE:MKL) earned premiums rose 11% from $ 5’049’793 in FY 2019 to 5’612’205 $ at the end of FY 2020

Book value per common share outstanding rose 10% from $ 802,59 to $ 885,13 at the end of FY 2020.

The combined ratio in FY 2020 was 98% after 94% in 2019 but in the fourth quarter 2020 Markel reported an improved combined ratio of only 89%, which even included four points of pandemic and catastrophe-related losses.

Markel’s insurance operations improved in a significant way:

“Our insurance operations delivered an underwriting profit for 2020 in the face of significant losses attributable to the global pandemic and the unusually high number of natural catastrophes as we benefited from capturing meaningful rate increases and new business in targeted growth areas globally, while exercising strong expense discipline,” commented Thomas S. Gayner and Richard R. Whitt, Co-Chief Executive Officers.

The investment return of Markel decreased 18% primarily driven by the impact of lower short-term interest rates on short-term investment income.

Net investment gains of $ 617,979 in 2020 were primarily attributable to an increase in the fair value of equity securities.

Looking at the private equity segment “Markel Ventures” operating revenue rose 36% to $ 2,794,959 thanks to 2 acquisitions in 2020 and operating income rose 51% to $ 254,078

Investors were pleased with these results. Markel’s share price rose 11% since the 2nd of February when results were released.

The all important book value / share price ratio stands at 1.2 ,rather cheap for Markel which is normally valued at 1.5!

This low ratio reflects 2 problems Markel has in the current environment:

1. Today to find great businesses as acquisiton targets at acceptable prices for Markel Ventures is very hard!

2. Regulatory control of the way Markel holds and invests capital!

Therefore investors should not expect market beating results in the near future but over a time horizon of 5 to 10 years the picture could change materially.

Markel today is a „Hold“!

Shopify: stock market correction versus long term view!

November 10th, 2020 Comments off

Shopify’s (NYSE:SHOP) share price yesterday fell more than 13% together with other online retail and digital payment stocks after Pfizer and BioNTech released coronavirus vaccine news.

It is understandable that investors want to lock in gains they made year to date. Even after this correction shares of Shopify surged 127% this year!

But should they ignore long term trends? The coronavirus pandemic only accelerated economic and technological trends that existed before and will continue after the pandemic.

So perhaps this is a good moment to look at Shopify’s Q3 2020 financial results:

Shopify grew revenue 96% and gross volume merchandise (GMV) which is all what is sold by merchants on Shopify’s platform, grew 109% year over year!

These are incredible numbers: “The accelerated shift to digital commerce triggered by COVID-19 is continuing“, said Shopify’s president Harley Finckelstein.

And don’t forget that this year we most probably look ahead to the biggest online shopping holiday season ever!

The company also signed up a record number of merchants to its premium-level plan for high volume merchants called Shopify Plus like p.e. luxury brand Dior.

Q3 2020 was Shopify’s second profitable quarter: Net income for Q3 2020 was $191.1 million, or $1.54 per diluted share, compared with a net loss of $72.8 million, or $0.64 per basic and diluted share, for Q3 2019.

Shopify also fortified its balance sheet this quarter: at September 30, 2020, Shopify had $6.12 billion in cash, cash equivalents and marketable securities, compared with $2.46 billion on December 31, 2019.

To fund its growth and new initiatives the company raised additional cash with a stock offering of 1.265 million shares, bringing in $1.12 billion, and a convertible note equivalent to $920 million.

It is almost certain that Shopify’s long term growth trend will continue. After yesterday’s pullback the stock is still valued at a price/sales ratio of more than 50.

That is not cheap but considering the growth potential Shopify today is a buy!

Markel released better than expected Q3 2020 results!

November 2nd, 2020 Comments off

Markel Corp. (NYSE: MKL) reported Q3 2020 results amidst a pandemic which left investors with a lot of doubts about insurers.

Markel’s stock lost about 20% since the beginning of this year. Other insurance stocks behaved the same way.

So let’s have a look at the numbers of Q3:

Earned premiums are up 7% to $ 1’394’428’000

Markel Ventures operating revenue is up strongly by 66% to $ 824’132’000

and comprehensive income more than doubled to $ 520’089’000

Book value per share outstanding climbed slightly to $819,71 from $802,59 at 31st of december 2019.

CFO Jeremy Noble explained: “.fortunately, we saw positive contributions from each of our three engines during the third quarter.

Our insurance operations produced an underwriting profit despite elevated levels of natural catastrophe losses, as well as increases to reserves related to the pandemic, reflecting the strong underlying performance of our business.

Our Markel Ventures operations delivered meaningful profits, demonstrating their resilience despite economic uncertainty, and our investment portfolio also saw gains amid volatile market conditions.”

Co CEO Tom Gaynor pointed out that “losses occured by Markel’s clients stem not just from the things you see in the headlines regarding the pandemic, but also a spate of natural catastrophes such as more hurricanes than hurricane names, wildfires, a major derecho, and ongoing and recurring events and circumstances that we see regularly in our insurance operations”

Markel already in Q1 2020 increased reserves in a meaningful way. So investors could be cautiously optimistic that the worst is coming to an end. And Markel Ventures seems to be very resilient to the crisis.

Markel’s stock today is valued at a price/book ratio of only 1.1 which is rather cheap for this high quality company.

For patient investors with a long term horizon Markel today is a „buy“!

Shopify’s Q2 2020 results blew past analyst estimates

July 31st, 2020 Comments off

Shopify’s Q2 2020 results were just incredible: second-quarter revenue grew 97% on gross merchandise volume growth of 119% year on year!

Shopify’s $714.3 million in quarterly revenue was more than $200 million ahead of what analysts forecasted.

New stores created on the Shopify platform grew 71% in Q2 2020 compared with Q1 2020, driven by the shift of commerce to online as well as by the extension of the free trial period on standard plans from 14 days to 90 days.

Adjusted operating income for the second quarter of 2020 was $113.7 million, or 16% of revenue, compared with adjusted operating income of $6.4 million or 2% of revenue in the second quarter of 2019.

Shopify is clearly working with a huge tailwind caused by the pandemic and the rapid shift to online-commerce.

2 days ago Shopify filed for a $7.5B mixed shelf offering to give it the right to sell several different types of securities. The size of this offering added phantasy to the stock and fueled speculation about a big acquisition.

As the tailwind of rapid digitalization of organisations continues Shopify is certainly a „buy“ even at today’s prices.

Shopify is not immune to economic uncertainty if buyers spend less but in these days merchants of all kind need to develop an online-strategy and Shopify is by far the no.1 company to help them.

Markel’s Q2 2020 results impacted by the pandemic

July 31st, 2020 Comments off

Markel Corp. Q2 2020

Markel Corp. (NYSE:MKL) the speciality insurer released Q2 2020 results.
It comes as little surprise that the results were severely impacted by the pandemic.

The positive news are that gross written premiums were 3.7 billion for the first half of 2020, compared to 3.3 billion in 2019, an increase of 12%.

The underwriting results for the six months ended June 30, 2020 included $325 million of underwriting loss attributed to the COVID-19 pandemic, which added 12 points to the consolidated combined ratio which jumped to 103%.

But as we know the “Markel style“ the ample reserves should now be sufficient to cover all future losses caused by the pandemic.

Luckily the investment results benefitted from a meaningful recovery in public equities in the second quarter.

Markel’s share price recovered these days after after a decline in the first half of 2020 and ended yesterday at $ 1’045,37
For long term investors Markel is a buy!

“This post-COVID world is what we’re building for” explains Shopify and the stock jumped!

May 8th, 2020 Comments off

Shopify Inc. (NYSE:SHOP) stock shot up after releasing impressive Q1 2020 results:

Revenue in Q1 2020 soared 47% to $470 million, way ahead of analysts estimates and of their own guidance.

The company posted a surprise profit: adjusted net income came in at $22.3 million, or $0.19 per share. Analysts were expecting an adjusted net loss of $0.18 per share.

Gross merchandise volume (GMV) jumped 46% to $17.4 billion, with gross payments volume (GPV) of $7.3 billion.

And here comes a fantastic number which underlines the value Shopify is creating for its merchants:

GMV through point-of-sale (POS) channels plunged 71% between March 13 and April 24 when physical stores were closed, but Shopify’s retail merchants were able to replace 94% of those sales on average with online sales!

This means an impressive immediate and accelerated shift away from brick-and-mortar toward online purchasing which certainly saved a lot of shops!

“This post-COVID world is what we’re building for and we have shifted accordingly.
Shopify’s world view has not changed. Our conviction that merchants need to be able to sell to their buyers wherever they may be remains as true today as it was a decade ago” explained COO Harley Finkelstein on the conference call!

Shopify continues to invest heavily in its Shopify Fulfillment Network, which was announced last summer and launched its „Shop app“ last week, an aggregated e-commerce marketplace that will compete more directly with Amazon.

Shopify’s balance sheet continues to be very strong. At the end of last quarter they had cash and cash equivalents of $2.36 billion and no meaningful debt.

Since the beginning of 2020 Shopify’s share price has risen 77%!
Is Shopify still a buy at today’s price?

Shopify’s stock is valued at an impressive price/sales ratio of 53 which means that a lot of the future is already priced in.
But on the other hand Shopify has an enormous potential to become the no.1 platform for independent online merchants.

Therefore it could be wise to wait until the stock price will possibly decline further following today’s anouncement of a secondary offering of 1’850’000 shares or when the general mood at the stock market turns negative!

… until February everything went well… but then…

May 1st, 2020 Comments off

Markel Corp. (NYSE:MKL) the specialty insurer and investment company released Q1 2020 Earnings

… until February everything went well… but then…

As Co-Ceo Thomas S.Gayner put it:

„At the beginning of the year, we started with excellent operational momentum in our diversified insurance, investment and ventures operations. We entered the year with a conservative balance sheet, marked by high-quality fixed income holdings, no near-term debt maturities and a publicly traded equity portfolio that stood at 69% of shareholders’ equity. Those equity securities had a cost basis of $3.3 billion and a market capitalization of $7.6 billion at that time.“

Starting with the top line things are not looking so bad:
gross written premiums were $1.9 billion for the quarter compared to $1.7 billion in 2019, an increase of 13%. This increase is almost entirely due to our insurance segment, which reported gross written premiums of $1.4 billion, an increase of 19% compared to the 2019 period.

But then the picture changes:
the consolidated combined ratio for Q1 2020 was 118% compared to 95% in Q1 2019.

During the quarter, Markel recognized their best estimate of pre-tax net losses and loss adjustment expenses of $325 million for COVID-19. These COVID-19 losses increased the consolidated combined ratio by 24 points. This means that without the effects of COVID-19 the combined ratio would be 94%.

Net investment losses for the quarter were $1.7 billion compared to net investment gains of $612 million last year, a year-over-year decline of $2.3 billion.
Essentially all of the net investment losses in 2020 were attributable to the decrease in the fair value of our equity portfolio during the period as COVID-19 caused unprecedented volatility in the capital markets as they explained on the conference call.

Revenues from Markel Ventures their investment arm increased by 12% to $511 million for 2020 compared to $455 million last year.
The increase in revenues was primarily related to an acquisition in 2019 and, to a lesser extent, an overall increase in the consumer and building products businesses.

Markel reported a net loss to shareholders of $1.4 billion for 2020 compared to net income to shareholders of $576 million a year ago.

Book value per common share outstanding was $705.68 at March 31, 2020, 12% less than $802.59 at December 31, 2019.

After the earnings release the market reaction was positive and the share price went up.
Knowing the management and the sound traditions of Markel we can assume that they put all the estimated loss into the reserves of the first quarter.

So if this crisis will not worsen we do not have to expect further increases in loss reserves.

On the other side as the Federal Reserve lowered interest rates to near zero there will be very low investment returns to earn on the short term fixed income side.
Luckely Markel still has about 58% of shareholder’s equity invested in stocks.

At yesterday’s closing price of $ 865.84 Markel has a price/book per share ratio of 1.2
It is a good price to buy but don’t expect quick returns on this one!