Despite its stock's torrid gains in recent years, investors are still underappreciating Shopify's (NYSE:SHOP) growth potential.

So says RBC Capital analyst Mark Mahaney. On Thursday, Mahaney reiterated his outperform rating for Shopify's stock and boosted his target price from $825 to $1,000. Mahaney's new forecast represents potential gains of 16% for investors, compared to Shopify's current price of $860.

A gold bull sculpture.

RBC Capital analyst Mark Mahaney is bullish on Shopify's shares. Image source: Getty images.

Mahaney argues that investors are underestimating the size of Shopify's market opportunity, its ability to earn higher fees on the sales the merchants on its platform generate, and its ability to strengthen its operating margins over time. Thus, Mahaney says Shopify's long-term earnings potential is far higher than many investors expect. 

Will Shopify shares reach $1,000?

Mahaney's arguments are sound.

Shopify has a massive total addressable market. Global retail e-commerce sales will grow to more than $6.5 trillion by 2023, according to Statista, up from $3.5 trillion in 2019. Shopify's platform currently facilitates roughly 6% of U.S. online retail sales and a smaller portion of global e-commerce sales. But it's rapidly gaining share of these enormous markets. And its new partnership with retail titan Walmart should only help to accelerate its growth.

Shopify excels at finding new ways to better serve the merchants that rely on its platform as their e-commerce operating system. As it launches new services, it should be able to generate higher fees on merchants' sales. And as a primarily software-based business, Shopify's profit margins should rise as it scales its operations.

For these reasons, it's likely that many investors are not yet fully appreciating Shopify's true earnings power -- and its stock's potential to ascend to new all-time highs. Thus, reaching $1,000 per share seems not just possible, but probable -- and perhaps sooner than many investors think.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.