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  5. SHOP: Correct me if I am mistaken but Shop missed estimates and the stock tanked then they beat estimates last week and the stock soared. [Shopify Inc. Class A Subordinate Voting Shares]
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Q: Correct me if I am mistaken but Shop missed estimates and the stock tanked then they beat estimates last week and the stock soared. Over the past 2 days the stock is up approximately 30%. Does the erratic performance make one doubt their ability to at least achieve estimates, let alone exceed them? I assume it is the company’s executives who project the upcoming numbers! Is executive compensation reasonable? I seem to recall a recent comment that executive compensation was ridiculously high. Any thoughts you have would be appreciated.
Jim
Asked by James on August 12, 2024
5i Research Answer:

SHOP compensation is high, but so are most tech companies. The CEO takes a minimal salary and everything else is stock-based. The company could improve its guidance, as could analysts, but in a consumer-facing business it is very hard to be accurate. Investors need to stop taking a quarterly approach, but we doubt that's going to happen. If we look at its history over a longer term, it has in fact been excellent. Sales have gone from $1B in 2018 to an expected $10B+ next year. EPS from a loss of 6c to an expected profit of $1.33. This is in a seven year period, which of course included high inflation, Covid and other problems. The stock has gone from $18 to $68 (US) in that time, though admittedly has been way higher. But volatility is the price to pay here for growth, and we continue to like the stock for those who can handle the roller coaster ride.