Take a Dip: Shopify's Soaring Stock Needs a Pause, Offers a Near-Term Buying Opportunity
Potential Purchase Chance for Shopify's Shares Could Be on the Horizon
We've had our eye on Shopify Inc. (SHOP) since February 2025, and its impressive ride hasn't slowed down. The commerce giant, operating in both offline and online arenas, has kept its growth engine humming thanks to its seamless solutions across commerce and payment ecosystems [1].
Back in February 2025, we saw Shopify's promise and gave it a thumbs-up after a correction, pointing to itsRule of 50 outperformance, expanding profit margins, and declining short interest volumes [1]. Despite some market turbulence, the company has weathered the storm and more, regaining its pre-correction heights.
Shopify 1Y Stock Price
The sell-off during the April 2025 market meltdown saw Shopify plummeting well below our prior fair value estimates, only to rebound swiftly [1]. Much of Shopify's climb can be attributed to the 90-day tariff pause and the de-escalation of the US-China trade war, a tide that has lifted sentiments across consumer discretionary and commerce stocks [1].
Even amidst slowing consumer spending trends, Shopify and other enterprise SaaS companies have continued to thrive, with demand proving resilient in the face of macroeconomic headwinds and tariff risks [1]. This trend has extended to frontrunners likeMicrosoft (MSFT) and Adobe (ADBE), as reported in recent Q1'25 earnings announcements [1].
Shopify Financials
For the first quarter of 2025, Shopify posted revenues of $2.36 billion (-16% QoQ/ +28.6% YoY), operating margins of 13.9% (-6.9 points QoQ/ +3.1 YoY), and an adjusted EPS of $0.25 (-43.1% QoQ/ +25% YoY) [1]. Notably, these figures represent growth in Gross Merchandise Volume [GMV] to $74.75 billion (-20.8% QoQ/ +22.8% YoY) and Monthly Recurring Revenue [MRR] to $182 million (-3.1% QoQ/ +20.5% YoY) [1].
Shopify's continued leadership in the headless commerce segment is evident, especially with a 28% market share in the US [1]. The company's agility in adjusting to the rapidly evolving global trade environment has been on full display, with various tariff-related features introduced quickly post announcments [1].
Apart from strengthening shipping and fulfillment capabilities across multiple carriers, providers, and local warehouses, Shopify has focused on expanding into non-core end markets like health/beauty, home/garden, food/beverage, animals/pet supplies, and arts/entertainment [1]. These strategic decisions have contributed to robust adoption of its merchant and fintech offerings [1].
Consensus Forward Estimates
These factors may explain why analysts have raised their forward estimates, expectingShopify to chart an accelerated top/bottom-line growth at a CAGR of +21.5%/ +25.7% through FY2027 [1]. This represents a notable upgrade from original estimates of +18.3%/ +14.2% made a year ago, even if the growth rate is decelerating compared to the 5Y historical growth profile [1].
Shopify Valuations
The market's enthusiasm around Shopify's prospects is evident in the premium FWD P/E non-GAAP valuations of 78.87x, slightly lower than its 1Y mean of 68.84x but higher than the 5Y mean of 300.73x [1]. However, even as its stock trading at a premium, the stock is still trading at a significant discount compared to the peer group P/E mean of ~40x [1].
Is SHOP Stock a Buy, Sell, or Hold?
Shopify's stock has seen a remarkable 48.4% climb since the April 2025 bottom and is now testing resistance levels at the $114s range [1]. While the bullish thesis for Shopify remains strong, the company's recent run-up suggests it might be due for a pullback. Our analysis indicates that an improved return profile could be achieved upon a moderate retracement to the $85 or $100 ranges [1].
Investors seeking to buy Shopify stock should exercise patience and wait for an opportunity that offers better margins of safety. While the long-term price target remains optimistic, striking at present may not provide the best returns.
Enrichment Data:- Shopify reported a 27% year-over-year increase in revenue to $2.36 billion in Q1 2025, marking its eighth straight quarter of over 25% revenue growth [5].- The company's gross merchandise volume (GMV) grew by nearly 23% to $74.75 billion, and monthly recurring revenue rose to $182 million from $151 million a year ago [5].- Over the past 52 weeks, Shopify's stock has climbed 85%, outperforming the Roundhill Magnificent Seven ETF (MAGS), which returned 25% over the same period [5].- For the second quarter of 2025, Shopify expects revenue growth in the mid-20% range and gross profit growth in the high teens [5]. Analysts generally maintain a positive outlook, with a consensus rating of "Moderate Buy" [5]. Among analysts covering Shopify, 28 recommend a "Strong Buy," while 14 suggest holding, and only one advises selling [5]. Average price targets are at $115.39, with the highest reaching $175.00 [5].
- While Shopify continues to outperform and grow in various sectors such as health, beauty, and food, its recent surge in stock price may signal a need for a pause, offering a potential buying opportunity for investors looking to invest in technology-driven finance solutions.
- As analysts forecast accelerated top-line growth for Shopify, a near-term pullback in the stock's price could present an advantageous entry point for those interested in long-term investments in commerce companies, particularly those offering fintech solutions and expanding into non-core markets like health and beauty.
