Palantir Technologies stock returned 240% in the past year, bringing its market value to $199 billion as of March 2. But certain Wall Street analysts think Shopify (SHOP 7.20%) and Advanced Micro Devices (AMD +0.73%) will top that figure within a year.
- Tyler Radke at Citigroup has set Shopify with a target price of $175 per share. That implies 56% upside from its current share price of $112. It also implies a market value of $228 billion.
- Jim Kelleher at Argus has set Advanced Micro Devices with a target price of $160 per share. That implies 60% upside from its current share price of $100. It also implies a market value of $259 billion.
Those forecasts may be too aggressive, but I do believe Shopify and AMD can achieve $200 billion market values within 12 months, topping what Palantir is currently worth in the process. Here's why.
Image source: Getty Images.
1. Shopify
Shopify offers a turnkey solution for retail. Its software helps sellers run their businesses across physical and digital stores. Shopify also provides adjacent financial services for payments processing, bill payments, tax filing, and account management. And it supports merchants with solutions for marketing, logistics, wholesale, and cross-border commerce.
The company two years ago introduced Shopify Magic, a suite of artificial intelligence (AI) tools that can draft product descriptions, edit images, and surface business insights. Shopify also uses AI internally to support its sales, customer service, and human resources teams. President Harley Finkelstein on the fourth-quarter earnings call told analysts, "Shopify will very much be one of the major beneficiaries in this new AI era."
Anthony Chukumba at Loop Capital views Shopify as an underappreciated AI stock. "We believe Shopify will be able to grow its revenue at a much faster rate than its operating expenses for the foreseeable future, which will result in operating and free cash flow margin expansion and a higher valuation," he wrote in a note to clients in December.
Shopify reported mixed results in the fourth quarter, missing estimates on the bottom line. Revenue increased 31% to $2.8 billion, the second consecutive sequential acceleration, and non-GAAP earnings increased 29% to $0.44 per diluted share. Also, Shopify reported a 10-basis-point increase in take rate, meaning merchants are engaging more deeply with its adjacent services.
Importantly, Shopify accounted for 12% of retail e-commerce sales in the U.S. last year, up from 10% in the prior year, meaning it gained two percentage points of market share. That makes Shopify the second largest domestic e-commerce company behind Amazon, and management expects further market penetration in the coming year.
Wall Street thinks Shopify's adjusted earnings will increase 20% in 2025. That makes the current price-to-earnings (PE) multiple of 88 looks expensive. But management guided for mid-20% sales growth in the first quarter, which makes the consensus estimate look low. And the company beat the consensus earnings estimate by an average of 24% in the past six quarters.
If that pattern continues, Shopify could attain a $200 billion market value while its PE multiple fell to a slightly more reasonable 82 times. That implies a share price of $154, which implies 37% upside from its current price of $112. Admittedly, there are high expectations baked into my prediction, but it's less aggressive than Radke's target of $175 per share.
NASDAQ: AMD
Key Data Points
2. Advanced Micro Devices
Advanced Micro Devices (AMD) is a semiconductor company that designs chips in four end markets: data centers, client (personal laptops and desktops), gaming, and embedded processors. The company is best known for central processing units (CPUs) and graphics processing units (GPUs), both of which support AI workloads.
AMD in recent years has gained substantial CPU market share in personal computers and data center servers. Those market share gains have come at Intel's expense, and investors should expect more of the same in the coming years as AMD continues to bring new Ryzen chips (personal computers) and Epyc processors (data centers) to market.
However, AMD has struggled to compete with Nvidia in the data center GPU market. In fact, Nvidia accounted for 98% of data center GPU shipments in the last two years. However, while AMD has no chance of catching the leader, it may gain market share as production of its latest Instinct GPU (MI350) ramps in mid-2025. Those chips are purpose-built for AI.
AMD reported reasonably good financial results in the fourth quarter. Revenue increased 24% to $7.6 billion and non-GAAP earnings increased 42% to $1.09 per diluted share. CEO Lisa Su told analysts data center AI sales would grow from $5 billion in 2024 to "tens of billions of dollars of annual revenue over the coming years."
The market is currently too pessimistic where AMD is concerned. Jim Kelleher at Argus wrote in a recent note, "In our view, AMD's beaten-down share price does not fully reflect the company's long-term revenue and margin growth potential, and its ongoing market share gains at Intel's -- and potentially Nvidia's -- expense."
Wall Street expects AMD's adjusted earnings to increase 37% in 2025. That makes the current PE multiple of 30 times look downright cheap. If earnings align with expectations and the market affords AMD a slightly higher valuation multiple, the stock could certainly return 60% in the next year. But AMD could achieve a market value of $220 billion (which implies 37% upside) even its PE ratio remains unchanged.
