Baird analyst says short attack is hogwash

Baird analyst Colin Sebastian said today’s short report from Citron Research on Shopify (NYSE: SHOP) creates a buying opportunity.

Sebastian views the report, which focuses on SHOP marketing practices and draws a comparison with multi-level marketing companies, such as Herbalife, as “largely off-base”. Sebastian also views the short thesis as “very narrow.”

First he said comparison with Herbalife are clearly misleading, as Shopify is not a multi-level marketing company. He describes Shopify as a SaaS e-commerce platform focused on SMBs.

Second, and more to the point, the firm’s survey of Shopify ads today indicate very few (1 out of 20) contain the word millionaire, whereas the vast majority of the marketing campaigns are focused on easy online store set-up, building a brand, selling on Facebook, or creating an online shop. “In fact, in order to find references to “millionaire ads,” even the short report suggests needing to search Google very specifically with the keywords “Shopify Millionaire” to uncover such ads, since they are not very apparent otherwise,” Sebastian comments. “Moreover, reviewing Shopify’s Facebook posts since the beginning of the year, we could find no references or promises to prospects of becoming a millionaire. Notably, there is a page within the Shopify website that references “someday millionaires,” which could possibly push the boundaries of thoughtful advertising, although this does not appear to be a centerpiece of the company’s marketing efforts.”

A survey from the firm today of Shopify sellers suggests messaging from company does not promote a “get rich quick” narrative. “Earlier today, we also conducted a survey with Shopify sellers to understand what marketing messages they see from Shopify, and an overwhelming majority (>90%) said they hadn’t seen a Shopify ad claiming they could become millionaires and/or do not agree with the accusation that Shopify’s success is based on this claim,” the analyst comments.…