In the Canadian technology arena, perhaps no company is as well-known as e-commerce giant Shopify Inc. (TSX:SHOP)(NYSE:SHOP). The provider of e-commerce solutions to small and medium-sized businesses has grown at a truly astounding rate since the company’s initial public offering (IPO) slightly more than two years ago, more than tripling over this time period. With the tech company reaching an astronomical $150 per share recently, it is unsurprising that investors who got in early with Shopify decided to take some money off the table. After all, the company’s valuation multiple had gotten out of control, and many investors were likely feeling uneasy due to the richness of the valuation investors were ascribing to Shopify.
What ended up resulting in the more-than-20% tumble from Shopify’s peak, however, was an analyst report released by Andrew Left of Citron Research in which Mr. Left accused Shopify of being a "get-rich-quick scheme" by marketing itself to those considering an e-commerce solution for their business as a way to become wealthy overnight. He compared Shopify to Herbalife Ltd. (NYSE:HLF) which has been under investigation for its marketing tactics specifically.
Interestingly, Mr. Left did not take offense to Shopify’s business model, actually alluding to the fact that the company had done a good job of delivering results for shareholders. The thesis behind the drop, then, should be taken under advisement by investors considering buying the dip and seeing value at the $120 level.
Invest wisely, my friends.
