But followers urge CEO to focus on company and not worry so much about share price
Shopify Inc. CEO Tobias Lütke had some words for analysts today. Photo by Julie Oliver/Postmedia Tobias Lütke, founder and CEO of Shopify Inc., questioned the Bay Street and Wall Street analysts who have been expressing doubt about his company, wondering aloud on Twitter whether anyone was charting the track records of the men and women who judge publicly traded companies for a living.
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“Is there a place where financial analysts’ track records are kept? People seem to pay attention to them but are they being held accountable?” he asked his nearly 257,000 followers on May 9.
Lütke’s comments followed Shopify’s latest quarterly call with analysts on May 5, when the Ottawa-based company announced underwhelming results for the first quarter of 2022. Shopify, an e-commerce company with ambitions of competing with Amazon.com Inc. by targeting independent businesses, reported a net loss of US$1.5 billion in the first quarter, compared with net income of US$1.3 billion a year earlier.
Shopify’s share price skyrocketed during the pandemic, peaking at about $2,140 on Nov. 19, 2021, compared with about $700 in mid-February 2020. But investors have grown less enthusiastic about companies that put growth ahead of profits. Shopify dropped about 21 per cent last week, wiping out all of its pandemic gains. The stock was down another six per cent at midday in Toronto on May 9, trading around $455 amid a broader market decline.
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The analysts on the Shopify call last week were vocal in their skepticism over Shopify’s strategy, asking Lütke, president Harley Finkelstein, and CFO Amy Shapero about the declining stock price, how the company planned to retain tech talent in a tight labour market, the company’s acquisition of fulfillment company Deliverr Inc., changes in governance, and more.
In the financial services field, one of the more coveted roles is that of an analyst. Their main job is to assess data in order to evaluate outcomes of business decisions, identify opportunities, or make investment recommendations. Some become stars for making bold calls that enrich their employers and the other investors they advise.
But Lütke said the role could be more transparent, alleging that analysts often mask their failures with jargon.
“‘Company X,Y out-performed analyst expectation is just different framing form [sic] ‘analysts failed to accurately predict company X,Y,’” Lütke said. “Especially when it’s mostly macro economic factors that cause it. [Rising] tide raises all boats kinda stuff. That feels like analysts should really have that in their models.”
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“Company X,Y out-performed analyst expectation” is just different framing form “analysts failed to accurately predict company X,Y”.
— tobi lutke (@tobi) May 8, 2022 Some of his followers urged him on. “Please build this,” commented @JoshWomack.
Others wondered why Lütke was letting himself get distracted by the share price. “Any time a ceo attacks the sell side there is a much bigger problem with the company than analysts failing to be accurate,” tweeted @suitedupwook. “If you correctly forecasted your own business, and communicated correctly, who cares about the sell side. What are you hiding?”
More On This Topic As Shopify stock sinks on slowing growth, executives ask investors to think long term Shopify shares plunge as Canada’s tech champion reports big quarterly loss Shopify shares are plunging after earnings miss A tweet from the handle @kavanshah said: “Tobi pls stop worrying about what analysts say and focus on Shopify. As a professional investor I assure you no one takes sell side price targets seriously. As a bag holder I really hope you block out the noise and focus on executing.”
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Article content And some others pointed out that companies such as Bloomberg L.P., WallStreetZen, and Tipranks all track analyst performance to some degree.
Traders with access to a Bloomberg terminal can view analysts by ranking, and their recommendations on whether investors should buy, hold, or sell the stocks they cover. Wallstreetzen, an investment tool for “non-pros,” offers a list of the top analysts, which is free. Tipranks offers something similar, but for a fee. Of these investment tools, Tipranks is closest to what Lütke is suggesting, as it “evaluates public stock recommendations made by financial analysts and financial bloggers, then ranks those experts based on their accuracy and performance.”
Lütke’s comments stood out because they were a deviation from the calm, co-operative relationship that often exists between CEOs and analysts. Analysts tend to throw CEOs softball questions on investor calls, as being too critical, at least in public, would risk the insider access on which they rely for their research.
Forty-six analysts currently follow Shopify and only three of them recommend selling the stock, BNNBloomberg reported, citing Bloomberg data. The majority of analysts advise buying the company’s shares, and 18 recommend holding it.
• Email: mcoulton@postmedia.com | Twitter: marisacoulton
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