3. Shopify Inc. (NYSE: SHOP)
Number of Hedge Fund Holders: 91
Shopify Inc. (NYSE: SHOP) is a Canada-based ecommerce firm. It was founded in 2006 and is ranked third on our list of 10 best upside stocks to buy right now. The company’s shares have offered investors returns exceeding 65% over the course of the past twelve months. The firm provides businesses with various sales channels, including online stores, mobile platforms, physical retail, social media storefronts, mobile-based applications, and others. It also offers inventory and payments services.
On April 28, Shopify Inc. (NYSE: SHOP) reported earnings for the first three months of 2021, posting earnings per share of $2.01, beating market predictions by $1.26. The revenue over the period was more than $988 million, up 110% year-on-year.
Out of the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Shopify Inc. (NYSE: SHOP) with 1.7 million shares worth more than $1.8 billion.
In its Q4 2020 investor letter, RGA Investment Advisors, an asset management firm, highlighted a few stocks and Shopify Inc. (NYSE: SHOP) was one of them. Here is what the fund said:
“While we are pleased with the results of these specific purchases, we made a huge mistake of omission at that time. This mistake will likely be one of the biggest we ever make in our careers. Specifically, we did deep work on Shopify and loved everything about the business qualitatively. Unfortunately, we ultimately found ourselves unable to get comfortable with the numbers.
We built our model up from the key performance indicators (KPIs) that drive revenues. Our last save of the model dated 8/3/2016 looked as follows: (Page 2). These numbers seemed right from everything we understood about the company. While we tend not to rely on sell-side consensus estimates before finishing our own workup of the business, we do give them a look once we feel comfortable with how we have approached our analysis as it is often helpful to get a sense of what the average participant in the market expects the business to do. With Shopify, the sell-side consensus was so far from where our numbers were shaking out, it seemed almost impossible that we were basing our analysis on the same underlying information. Our natural next step was thus to take the sell-side consensus data and work backwards to figure out the implied expectations on each of the key revenue drivers. Here is what the sell-side consensus looked like as at the time: (Page 2).
Shopify’s actual revenues for 2016-2018 ended up being $389m, $673m and $1,073m. In other words, not only were we justifiably far more optimistic than the consensus estimate, but we also were far too conservative in terms of how the company actually performed...” (read the complete letter here)
