Shares of Shopify fall on surprise loss, but Cramer says you will regret selling

Shares in Canadian e-commerce company Shopify fell after reporting a surprising loss in earnings.

The stock slipped more than 6% on Tuesday after Shopify had a $ 0.25 loss in Q3, analysts' estimates of 11 cents gain were missing, according to FactSet.

However, CNBC's Jim Cramer said investors would regret selling Shopify as the company ramped up costs to grow.

"They have losses, but they spend money to grow," Cramer said on "Squawk on the Street" on Tuesday. "I defy Shopify, defy the sellers of Shopify. You'll regret selling it. You don't know what you're doing. I like the stock."

In June, Shopify said it planned to spend more than $ 1[ads1] billion on multiple fulfillment centers to compete with Amazon and EBay. Total operating expenses in the third quarter increased to $ 252.4 million from $ 181.1 million the year before.

The missing EPS was largely driven by "a significant one-off tax item," pointed out Colin Sebastian, senior research analyst at Baird, in a note on Tuesday.

Baird has a 12-month price target of $ 410 on Shopify, which would represent a 36% gain.

The price target is derived from a "combination of 16x our 2021E revenue estimate and a multi-year DCF, near the high end of SaaS valuations (20x + 2020E sales), which we believe is justified given Shopify's scope, massive market opportunities and technical sophistication, "Sebastian said.

– CNBC's Michael Bloom contributed reporting.

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