Asmus Puhl Finance Blog

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 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 31^st 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“!