If a CEO is spending millions of dollars on company stock, it’s often worth investigating the stock further. CEOs tend to have an intimate understanding of their businesses and are usually way ahead of analysts and portfolio managers when it comes to revenue and earnings trends.
In this report, we are going to highlight a large CEO stock purchase at Shopify Inc (SHOP:US). Shopify operates one of the world’s largest e-commerce platforms. Globally, more than one million retailers rely on its platform to sell their goods online. The company is listed on the New York Stock Exchange and the Toronto Stock Exchange and currently has a market cap of USD $50.2 billion.
Insider buying at Shopify
Our data shows that on October 31, Founder and CEO Tobias Lütke purchased 282,942 SHOP shares at a price of $35.34 per share. This trade cost the insider approximately $10.0 million.
First CEO stock purchase since IPO
This trade is worth highlighting for a couple of reasons.
Firstly, insider purchases at Shopify are rare. Our records show that there have only been a handful of non-automated insider buys since the company’s Initial Public Offering (IPO) in 2015.
Secondly, this trade represents Mr. Lütke’s first open-market purchase since the IPO. This suggests that he sees a lot of value in the stock right now.
Shopify stock is back at 2019 levels
Shopify's recent Q3 results showed the company continues to grow despite the global post-Covid slowdown in e-commerce.
For the period, revenue came in at $1.4 billion, up 22% year on year and ahead of the consensus forecast of $1.34 billion. Meanwhile, gross merchandise volume (GMV) came in at $46.2 billion, up 11% year on year. Gross profit grew 9% to $662.3 million (45% CAGR on a three-year basis).
Looking ahead, the company said that GMV growth will continue to outperform the broader US retail market in the fourth quarter. It added that operating expense growth is expected to sequentially decelerate in Q3.
It’s worth noting that, after a huge decline in 2022, Shopify’s share price is currently back at 2019 levels. This is despite the fact that revenue for 2022 is expected to be roughly 3.4 times revenue in 2019.
In light of the continued growth here, and the major share price fall, we see the insider buying as a bullish indicator.