Matt Frankel

Like pretty much any other stock in earnings season, it's all about expectations.

Shopify grew revenue by 34% in the first quarter, but they're guiding for full-year revenue growth in the high 20s range.

If you have 34% in the first quarter, high 20s the rest of the year, the law of averages tells you you're going to have a slowdown as you head into the rest of the year.

I'm not as worried about the net income number and the net income miss.

I don't think that's what's driving the stock here.

If a company's growing sales at 34% year-over-year and is profitable, then that's great in and of itself.

Shopify is in a very investment-heavy phase right now.

As you mentioned, it's trying to keep up with AI headwinds and things like that.

That can make bottom-line income lumpy.

But we really need to show the revenue growth to justify the spending.

It needs to keep revenue growth at an elevated enough level.

It doesn't sound like they gave an optimistic enough outlook to satisfy investors with the stock trading at 65X forward earnings, more than 12X sales.

Whatever metric you want to use, it's an expensive stock.

You correctly pointed out that three-fourths of the balance sheet is investments and cash and equivalents, which I'm a big fan of having a lot of cash and equivalents on the balance sheet, first of all.

So that's a big positive for Shopify.

But for the most part, and Lou kind of mentioned this, the outside investments were the results of partnerships.

So for example,

The largest investment Shopify has in a publicly traded company that's not Shopify is Affirm.

They own a roughly $1.5 billion stake.

It started when Affirm became the exclusive provider of ShopPay installments even before they went public.