DCF Studio

    SHOP.TO · TOR · Technology

    Shopify Inc.

    Also onConsensus Drift

    Implied value per share

    CAD 15.65

    Market price

    CAD 179.34

    Implied upside

    -91.3%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 1.3982

    Wrong toolThis model values the shares at 8.7% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedReports in USD, trades in CAD. Modelled in USD, converted at the end.
    AdjustedReported capital expenditure averages just 0.47% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    NoteRisk-free rate is an assumption: CAD assumption - no free live source available for this market.

    Current EV/EBITDA of 118.6x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    CAD 15.65-91.3%
    Exit multiple
    CAD 34.42-80.8%
    Market price
    CAD 179.34

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 14.7bnUSD 18.7bnUSD 23.8bnUSD 30.4bnUSD 38.7bn+27.3%
    EBITUSD 726.6mUSD 925.0mUSD 1.2bnUSD 1.5bnUSD 1.9bn+27.3%
    NOPATUSD 592.7mUSD 754.6mUSD 960.7mUSD 1.2bnUSD 1.6bn+27.3%
    Add depreciation & amortisationUSD 122.3mUSD 155.7mUSD 198.3mUSD 252.4mUSD 321.4m+27.3%
    Less capital expenditureUSD -147.1mUSD -187.3mUSD -238.5mUSD -303.6mUSD -386.5m+27.3%
    Less increase in working capitalUSD -138.0mUSD -175.7mUSD -223.7mUSD -284.8mUSD -362.6m+27.3%
    Free cashflow to firmUSD 429.9mUSD 547.4mUSD 696.9mUSD 887.2mUSD 1.1bn+27.3%
    Discount factor0.93350.81360.70900.61790.5385-
    Present valueUSD 401.4mUSD 445.3mUSD 494.1mUSD 548.2mUSD 608.2m+11.0%
    Present Value Of The ForecastUSD 2.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.30%CAD assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta2.083Reported 2.616, pulled toward 1.0 (Blume)
    Cost of equity14.75%Risk-free + beta x equity risk premium
    Cost of debt5.30%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 232.7bn99.9% of capital
    Total debtUSD 188.0m0.1% of capital, book value as a proxy
    Tax rate18.4%Effective, capped at statutory
    WACC14.75%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 11.19

    72% of EV

    Forecast FCFF, final year
    USD 1.1bn
    Capex at depreciation, working capital in reinvestment
    USD 1.7bn
    Less reinvestment at g/ROIC (17.0% of NOPAT)
    USD -295.2m
    Capitalised
    USD 1.4bn
    ROIC (WACC floor)
    14.7%
    Terminal value, undiscounted
    USD 12.1bn
    Terminal value, discounted
    USD 6.5bn
    Enterprise value
    USD 9.0bn
    Less net debt
    USD -5.6bn
    Equity value
    USD 14.6bn

    Exit at 20.0x EBITDA

    Value per shareUSD 24.61

    91% of EV

    Terminal value, undiscounted
    USD 44.6bn
    Terminal value, discounted
    USD 24.0bn
    Enterprise value
    USD 26.5bn
    Less net debt
    USD -5.6bn
    Equity value
    USD 32.1bn

    Spread between methods: 75%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    12.75%12.4912.5212.5512.5812.61
    13.75%11.7611.7911.8211.8411.87
    14.75%11.1411.1711.1911.2211.24
    15.75%10.6110.6310.6510.6710.70
    16.75%10.1410.1610.1810.2010.22

    Outlined: this model. Green text: above today's price of 128.26. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    EBIT margin4.9%86.3%+81.3pp
    Discount rate14.7%3.2%-11.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.