Of the downgrade reports we have seen, none really are critical of the company nor its potential. Most are due to concerns about valuation, and/or a possible slowdown in consumer spending. In aggregate, 23 analysts say BUY, 25 say HOLD and 4 say SELL. Analysts tend to become very conservative on stocks with large embedded gains, in this case 104%, especially when those stocks have seen big drawdowns in the past (SHOP fell 80% from peak to trough). This conservatism is often misguided, though, as once a company starts growing again it tends to carry momentum. This is true both fundamentally and stock-wise. It is not a cheap stock, but its new focus on profitability we think still makes it interesting. The 3Q earnings were 64% (!) better than estimates. It is doing many of the right things. Lower interest rates should help both the business and the stock, but admittedly that is a wide expectation already. But we like the growth, and its duopoly-like global position.
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