Shopify and 5 more stocks that are not so cheap to look at

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Lots of stock volatility and bargaining – you know where to look. But buying a dip doesn’t work in a bear market, and simply doesn’t raise shares of battered companies. In fact, it could be a recipe for further losses, because, again, what works when stocks go up doesn’t work when they go down.

Earn. In a bull market, especially by the Federal Reserve pumping money into the economy, it is not uncommon to consider what kind of numbers a company reports. If the company “beats”, the stock usually rises.

When stocks fall, however, there is only one type of earnings that accrues — which is generally based on the accepted accounting policy or GAAP. “Over the last few years, you could have ignored accounting, financial statements or anything else, and that doesn’t matter,” said Chris Senyek, chief investment strategist at Wolf Research. “Now that the Fed’s liquidity is being drained and interest rates are rising, it’s back to basics: balance sheets, cash flows and reading annual reports.”

The large gap between operating and GAAP earnings could be a sign that a company is not doing almost as well as stated. These gaps may be driven by acquisitions, restructuring charges, and the use of stock-based compensation, such as limited stock units and options offered to employees and executives instead of cash. The latter, in particular, can slash income in a way that makes a huge difference between GAAP and the adjusted number.

To be sure, stock-based comps work great in a growing market. While it lowers shareholders, it wants to stick around employees – and as the stock grows, everyone benefits. But when stocks fall, companies feel pressured to repurchase options, grant more shares or pay more cash. “It’s going to increase their cost structure,” Senyek says.

There are six stocks that have fallen sharply this year but, due to the high level of stock tremors, are not so cheap to look at.

Crowdstrike Holdings

Company / Ticker	Recent prices	YTD changes	2023E P / E	2023E GAAP P / E
Crowdstrike Holdings / CRWD	$ 142.64	-30.3%	90.3	N / A

E = Assumption, N / A = Not applicable

Source: Factset

Cybersecurity technology company CrowdStrike Holdings (Ticker: CRWD) is growing fast — its revenue could grow 66% in FY 2023 দ্রুত fast enough, perhaps, to convince some investors that it is trading 90 times its 2023 earnings estimate. But CrowdStrike paid $ 310 million in stock-based compensation in FY2022. Convert this to cash compensation and it will cost about 70% of the $ 442 million free cash flow created by CrowdStrike in FY 2022, when reported earnings will be lost. CrowdStrike can protect you from cyber attacks; Don’t rely on it to salvage your portfolio right now.

Snowflake

Company / Ticker	Recent prices	YTD changes	2023E P / E	2023E GAAP P / E
Snow / SNOW	146.82	-56.7	341.4	N / A

E = Assumption, N / A = Not applicable

Source: Factset

Snowflake (SNOW), a fast-growing cloud-based data and analytics products provider, is expected to gain 16 cents per share this fiscal, the largest since it went public in spectacular fashion in 2020. This may seem like a sign for investors when it comes to checking badly beaten stock. Snowflake’s GAAP earnings, however, are not so impressive: they record a share price of $ 2.22, converting its price / earnings ratio from more than 900 times non-existent. Again, the gap between the two numbers is the result of lots of stock-based compensation, which equates to about half of Snowflake’s sales in the last two years.

Shopify

Company / Ticker	Recent prices	YTD changes	2023E P / E	2023E GAAP P / E
Shopify / SHOP	391.33	-71.6	185.5	N / A

E = Assumption, N / A = Not applicable

Source: Factset

Shopify (SHOP) was an e-commerce darling in 2020 and 2021, with shares rising nearly 250% amid the epidemic lockdown. Now, the stock is trading near where it started in 2020. Bargaining opportunities for investors? Not quite. Shopify trades 185 times the 2023 earnings estimate at $ 2.11, but the stock-based compensation amount is about 10% of first-quarter sales. It may not seem huge, but when it comes to financial results, profits turn into losses. Shopify now allows employees to choose between stock and cash pay. If employees opt for cash, it becomes an expense that will show why you do not use the income metric.

Zscaler

Company / Ticker	Recent prices	YTD changes	2023E P / E	2023E GAAP P / E
Zscaler / ZS	132.30	-58.8	115.0	N / A

E = Assumption, N / A = Not applicable

Source: Factset

Zscaler (ZS), which makes cloud-based security software, is one of the heaviest users on the list and alternative to Seneca, equivalent to about 41% of sales, with ক্ষতি 104 million in stock compensation in the second quarter. If the stock-based compensation is cash, Zscaler’s quarterly free cash flow would drop to a loss of $ 29 million to $ 75 million. Its P / E will remain more than 230 times, well, nothing, because GAAP earnings will show a loss of $ 2.57. Zscaler screened Senyek as one of the companies in the list with the highest level of stock-based compensation. Even with a 59% decline in 2022, the stock is not a bargain.

Elevator

Company / Ticker	Recent prices	YTD changes	2023E P / E	2023E GAAP P / E
LIFT	19.29	-54.9	20.7	N / A

E = Assumption, N / A = Not applicable

Source: Factset

Lyft (LYFT) stock is down 55% in 2022, and it looks much cheaper than it was a short time ago. Shares are trading at almost nine times the projected earnings of 2023 before interest, taxes, depreciation, and payments, or Ebitda, which fell 26 times at the beginning of 2022.

S&P 500
It is estimated that Ebitda traded at about 12 times, which makes Lyft almost a valuable sport. But stock-based compensation makes up 18% of Lift’s first-quarter sales. Behind this, and 2023 Ebitda will be around minus $ 360 million instead of a profit of about $ 600 million, which is the opinion of analysts. Lyft can take you from point A to point A. Just don’t consider its stock a value.

PayPal

Company / Ticker	Recent prices	YTD changes	2023E P / E	2023E GAAP P / E
PayPal Holdings / PYPL	61.28	-56.9	16.7	25.3

E = guess

Source: Factset

PayPal Holdings

(PYPL) stock has fallen about 57% year-over-year so far and now trades for an estimated 17 times its 2023 earnings. This is a low-market multiple for an established fintech company আয় whose revenue is expected to grow by about 25%. It looks like a bargain, with stock-based compensation only 7% of PayPal’s first-quarter sales. Although it may seem low, adding the vibrations to the numbers would mean earnings close to আয় 3.21 a share, instead of $ 4.86 a share. PayPal stock will trade 25 times the unchanged number, a value of the shares is not interesting enough to consider.

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