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Citron Blasts Shopify, Says Changes To Facebook Data Will 'Annihilate' Company's Entrepreneurs

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Citron Blasts Shopify, Says Changes To Facebook Data Will 'Annihilate' Company's Entrepreneurs
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Facebook, Inc. (NASDAQ: FB) stock was down more than 3 percent Monday afternoon after a 14-percent fall in the past two weeks. Facebook is dealing with fallout from its Cambridge Analytica data scandal, and Citron Research editor Andrew Left said in a Monday report that Shopify Inc (NYSE: SHOP) could suffer collateral damage.

Facebook will be forced to dial back third-party access to data, and the Canadian e-commerce platform will come out on the short end of the stick, Left said. 

Facebook and Instagram play a key role in the solutions that Shopify pitches to its entrepreneurs, he said. Those solutions are based on Facebook data, and Left said Shopify will see an outflow of users once tighter data restrictions are applied.

“It cannot be disputed that tighter Facebook restrictions on access to privacy and pixels will annihilate the already fragile and dodgy business of the Shopify Entrepreneurs," the short seller said in the report.

UPDATE: Shopify said in a statement to Benzinga that it's "incorrect" to suggest the company's success is dependent upon Facebook.

"We remain extremely confident in our business, our merchants, and our growth model. Shopify offers the technology for businesses to sell on their own websites, in retail stores, on marketplaces like eBay and Amazon, and on social channels like Facebook and Pinterest," said spokeswoman Sheryl So. 

"The power of our platform is that we offer one interface for merchants to sell anywhere and everywhere. It's incorrect to say that our merchants' success is tied to Facebook and its data. It's similarly incorrect to say that our company's success is based on our Facebook advertising."

Citron's Left said Facebook will enact a vetting process that could spotlight on Shopify entrepreneurs who are marketing a bit too aggressively and misrepresenting offers to customers, Left said.

“Whereas larger brands and those who are using the Facebook ad tools to promote their business, this will represent a minor change,” the short seller said. “For those who are looking to game the system (entrepreneurs) — the gig is up.”

Facebook’s stock has dropped from $180 to below $160 so far in 2018. In that same time, Shopify stock is up from $105 to $145, despite a lack of profits, Left said. 

Shopify stock was down 4.55 percent at the time of publication Monday afternoon. 

Related Links:

The Facebook Data Controversy: What Wall Street Thinks

Twitter Investors Sacred Off By Facebook Privacy Concerns

Photo by Philafrenzy/Wikimedia. 

Latest Ratings for SHOP

DateFirmActionFromTo
Dec 2018DA DavidsonUpgradesNeutralBuy
Dec 2018Wells FargoInitiates Coverage OnOutperform
Oct 2018JefferiesInitiates Coverage OnHold

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Posted-In: Andrew Left Citron ResearchAnalyst Color Short Sellers Short Ideas Analyst Ratings Trading Ideas Best of Benzinga

 

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