Shopify Inc. (SHOP.TO)

One of his Top Picks about 45 days ago. Recommended it in late August and got in at a good price, and had been up 25%. He uses stop losses, and on the first tweak he saw from Citron, he exited his position. As a result, he lost 6%-7%. It is going to be a real tug-of-war for the next couple of days. All the analysts have not budged. We need to see this play out for a while. He is cheering for the company.

He is Short this, but not because of any holes in the story. It was just based on excessive valuations. Growth is still in place. In the short term, the problem is because of questions that were brought up by Citron, especially about the affiliate system, where a lot of people are setting up storefronts just to bring in others. That is not going to last. If you own, he would take a little money off the table.

Designed for merchants to end up getting payments through the web, and have been very successful at doing that. Sales have grown significantly. In 2016, they lost $.17, and the 2017 forecast is looking for a loss of $.09. In 2018 they go positive at $.21, but compared to a stock price of roughly $126, that is a pretty big multiple. Thinks that is what the big debate is about.

Analysing this, particularly on a very short-term basis, it is more than he can deal with. When it was all story, then you could at least say that maybe the story can just keep on going and the stock will keep going higher, but now somebody has taken a big bucket of mud and thrown it into the water. There will now be a period when we sort this all out, and can we filter the mud out? Is the growth story intact? The downside risk would be about $84. Fundamentally, Shopify is a brilliant concept, and should serve investors well in a long-term sense.

This is Citron Research’s latest target for Shorting. Baird & Co came out later in the day saying that his biggest arguments don’t hold water. The business model is not broken. The Seller wants to get a lot of noise out there so that the stock will go lower. Welcome to the world of concept stocks that don’t pay dividends and don’t have profits.

This has been a good Canadian story. The issue for him is, what do you pay for a good story today. It has very, very high expectations, and is part of the whole disruption world. What they do for businesses is wonderful, and they have a good lock, as proved by the fact that Amazon (AMZN-Q) uses their technology. The issue for him is valuation.

Another extremely expensive, high growth stock. They are migrating up the food chain to larger companies. It is priced for perfection. Another company could complete with them. If you have made nice money he would take the money and run.

He can’t do seasonality on this company, because you need 20 years of data. However, the chart shows that it just keeps on going higher and higher. It recently broke into an all-time high, and is outperforming the market. Momentum indicators are on the upside.

[Is it too late to add?] Technology is a key driver of the market right now. You want positions there. Don’t focus only on one sector. He has recommended this a couple of times on this show. They only have a 5% market share at present. They are moving into credit and delivery. This is a company that can continue to grow. These are three and four percent positions in portfolios.

If you buy this tomorrow and hold it for 5-10 years, you will do just fine. If you buy it tomorrow and hold it for 1 year, he has no idea what could happen. A very high-priced stock. Growth rates of these companies are impressive. The future is strong, but the price you pay is high. Buy a little bit tomorrow, and buy more 6 months from now. That is the way you have to chew your way into these stocks.

Had a tremendous run up to about $130, recently consolidated, and has now broken through that period of consolidation. Feels it is a little extended. Added to his holdings at about $136 when it broke through. The last period of consolidation was relatively short and relatively shallow, which generally is very bullish technically. Their runway for growth is tremendous as there is something like 10 billion small business owners in North America, and they have penetrated about 500,000. It would be an excellent complement to Amazon’s (AMZ-N) business. Wait for a bit of a pullback into the mid-$140 to low-$140.

At this price he would not be buying more. It is 17 times this year’s revenues and 12 times next year’s. If you bought in at lower levels don’t buy more. Make sure to protect your gains.

One of the few Canadian growth stocks where multiples are scary. This company has moved into the small business area and is offering backup services that makes them just as competitive as the big guys. A tremendous opportunity for small businesses to survive in this digital age. They have a huge market out there that is yet to be tapped. Management is top rate.

(A Top Pick October 7/16. Up 134%.) They seem to be doing just as well as their US counterparts. A good one to hold.

Canada’s largest e-commerce enabler. Their core clientele are small and medium-sized businesses. They believe there is an adjustable market of 47 million of those. Growing revenues at a torrid pace of up to 75% year-over-year. The company is not profitable yet, but expects to breakeven by the 4^th quarter of this year. An expensive stock, but it is a platform company, i.e., it is entrenching itself in its customers’ business models. They help customers e-commerce businesses with things like inventory management, promotion management, shipping, payments, etc. (Analysts’ price target is $151.)