When it comes to attacking Shopify Inc (US) (NYSE:SHOP), famed short-seller Citron Research just won’t quit.
Back in early October 2017, Citron called Shopify a “get rich quick scheme” with huge FTC risks. They slapped a $60 price target on Shopify stock. That was about 50% below where SHOP stock was trading at the time.
Shopify stock proceeded to drop from $120 to $90.
But it’s rebounded since then. Recently, Shopify stock was above $150.
Now, Citron is back at it again. Citron is claiming that Shopify has a huge Facebook, Inc. (NASDAQ:FB) reliance problem.
Citron argues that a bunch of Shopify’s merchants are “opportunists” who use Facebook data to sell goods over the internet to targeted individuals. Recent pressure on Facebook’s data-selling policies will force Facebook to clean up who it sells data to. This will negatively affect the ability of Shopify’s “opportunists” to sell goods online. Thus, Shopify’s merchant base is seriously at risk, concludes Citron.
But just like the bearish report back in 2017, this bearish report from Citron holds no weight.
As such, Citron is just giving long-term investors another opportunity to buy the dip in SHOP stock.
Here’s a deeper look.
Learn From The October 2017 Report
The bearish report on Shopify stock from Citron in October 2017 was fundamentally flawed. That is why I pounded on the table that the huge sell-off to $90 was a golden buying opportunity.
I argued that Citron fundamentally misunderstood Shopify’s business model. Shopify is a company which is finding tremendous success in today’s do-it-yourself, sharing economy built on decentralization principles and powered by data-driven decision making.
Lets take a step back here and look at the big picture here.
The do-it-yourself, sharing economy is emerging to the forefront. Just look at ride-sharing (Uber, Lyft, and Bird). Or home-sharing (Airbnb). Or photo-sharing and video-sharing (Snapchat, Instagram, and YouTube). We have become immersed in the sharing economy. A byproduct of this sharing economy is a do-it-yourself feature. You can sign up and drive for Uber/Lyft and make money. Or you can sign up and rent out your home for Airbnb and make money. Or you can sign up and share photos on Instagram, and if you’re good enough at it, become an Instagram Star and make a ton of money.
Moreover, this economy is built on decentralization principles. The economy is decentralized because everyone can do it on their own. Individuals don’t need to work for a big company or climb a corporate ladder. They simply need to be plugged into the digital landscape.
The economy is also driven by data. Uber uses a ton of data to predict driver/rider supply and demand. Airbnb also uses data to power its business. Netflix, Inc. (NASDAQ:NFLX) leverages data to create compelling original content. Facebook. Instagram. Snap Inc (NYSE:SNAP). Alphabet Inc (NASDAQ:GOOG). They all use data to power their businesses.
Citron Fundamentally Misunderstands Shopify — And the Sharing Economy
Lets now go back to Shopify.
Shopify is an ideal platform in this do-it-yourself, sharing economy. Shopify provides e-commerce solutions for anyone and everyone, much like Uber provides driver/rider solutions for everyone and Airbnb providers renting solutions for everyone. In this sense, Shopify is enabling a generation of do-it-yourself internet vendors.
Sound familiar? Instagram enabled a generation of do-it-yourself internet photo-sharers and YouTube enabled a generation of do-it-yourself internet video-sharers. The list of parallels here is actually very long, and quite impressive.
Moreover, Shopify is completely decentralized. That is a natural result of this “allowing everyone to do it” feature. It’s also powered by data-driven insights, since data is what allows the small guy to compete with the big guy in e-commerce.
For all these reasons, none of what Citron said in early October held much weight. That is why over the past several months, the numbers for Shopify have remained exceptionally strong and the stock has risen from $90 to $150.
The March 2018 Report Will Yield Similar Results
The same thing will happen this time around.
Yes, the FTC is launching an investigation into Facebook. But that won’t result in much. While Facebook is getting hounded for selling/using data, Nike Inc (NYSE:NKE) is marching higher thanks to acquiring a data-analytics company. Meanwhile,Google has been running ads throughout March Madness about how Google Cloud is using data to answer basketball-related questions.
The world of data-driven insights isn’t going anywhere any time soon. Facebook will get a slap wrist and be forced to tighten up data-selling policies by a bit. But that is about it.
Meanwhile, Shopify stock will continue to roar higher. The generation of do-it-yourself internet vendors is just starting to emerge. We’ve seen this narrative play out before. Just look at Uber. Or Lyft, Airbnb, Instagram, Snapchat, and many more. Decentralization unlocks huge growth. Shopify is that decentralization company for e-commerce.
Bottom Line on SHOP Stock
This is yet another opportunity to buy a Citron-inspired dip in Shopify stock.
Shopify stock remains my favorite long-term growth stock. This company is still in the early stages of unlocking tremendous value in the do-it-yourself e-commerce world.
As of this writing, Luke Lango was long SHOP, SNAP, GOOG, and FB.