Piper addresses Shopify concerns, maintains Overweight rating
Piper Jaffray analyst Sam Kemp notes that shares of Shopify are down 14% after a recent short report from Citron Research raised concerns about the composition of the company's subscriber base, its promotional language that potentially violates FTC guidelines, the operation of its referral network, and the company's lack of profitability. Concerns that Shopify's merchant growth is being bolstered by a pyramid scheme, influencers that are compensated for leads without disclosing their affiliate relationship with Shopify, and merchant growth from the promise of growing a dropshipping operation are "misunderstood," Kemp tells investors in a research note. The analyst says that while elements of each of these concerns could be valid, they represent only a small portion of Shopify's merchant growth. The analyst agrees that Shopify's promotional language may be aggressive, but he views its referral network as "legit." Kemp keeps an Overweight rating on Shopify with a $110 price target.