Is the market finally recovering? It's tentatively up this year, clawing back some of the gains it lost when tariffs became an unexpected key issue. But the tariff issue is far from over, and economic uncertainty is breeding market uncertainty.
If you're looking for an excellent growth stock, your best bet is to focus on the long term and not get too emotional about short-term moves. Top growth stocks can withstand changing economic trends and still offer tremendous potential for years. Shopify (SHOP -1.47%) is one such candidate, and it's a great choice if you have $1,000 to invest today.
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Why the opportunity is so big
Shopify has a number of strong internal and external growth drivers. It's the largest e-commerce platform provider in the U.S., by far, with about 30% of the total market, and the fourth-largest provider in the world. That creates strong network effects where potential clients consider the most obvious option first, and Shopify has the chance to impress them and keep them as customers.
There's the organic potential of e-commerce growth. Although it might seem like e-commerce is ubiquitous, it's actually still a small but growing portion of retail sales. According to the U.S. Department of Commerce, U.S. e-commerce sales increased from 15.3% of total retail sales in 2023 to 16.1% in 2024. Companies like Shopify are leading the shift as they continue to launch new products and features that make it attractive for customers to shop online.
Shopify has launched a complete and varied assortment of products and services to reach all tiers of businesses at every size and type. It's gone way past its roots as a website creator to offer individual components, which are attractive to many enterprise businesses, and to reach physical businesses with hardware and a robust management platform for online and offline clients.
It's successfully moved into the large business segment, with clients like Steve Madden and Herschel Supply Co. Some of its more comprehensive solutions include data analytics and order management, and everything works together in one platform, making for a smooth and seamless experience. It integrates with just about every tech partner, including Alphabet's Google, Stripe, and PayPal, and it releases 100 to 150 upgrades and new features twice a year.
Shopify is also going after the international market, which represented only 30% of its total business in the 2025 first quarter. That's a large and long-term market opportunity.
The large opportunity combined with Shopify's best-in-class platform is leading to high-octane performance. Sales growth accelerated in the first quarter to 27% year over year, with a 23% increase in gross merchandise volume (GMV). Operating income more than doubled, and free-cash-flow margin improved from 12% to 15%.
It's done this before
As I mentioned, you want a growth stock that won't crumble when the economy shifts. Shopify has gone through several ups and downs in the economy as well as internal shifts, but its core business model has been strong enough to make it through without severe negative consequences.
The company enjoyed accelerated growth early in the pandemic and then had to figure out how to downsize as demand waned. One mistake it made was acquiring logistics company Deliverr in 2022.
The thinking was good: What if it offered third-party clients the option for it to take care of all fulfillment? Those are the kinds of ideas companies like Shopify need to come up with to make e-commerce easier for clients and shoppers alike.
However, it didn't work out for Shopify; it was too big of a concept for where Shopify is today, and it was hurting its profits too deeply. It made a fairly quick decision to scrap that plan and sell Deliverr, and it's now past that and profitable.
It may make sense at a future point to integrate more horizontal products like that, but right now Shopify is doing well to challenge itself vertically. Because the core business is so strong, and because management took the decisive action to cut it loose instead of doubling down on a bad idea and trying to make the financials work, the company recovered quickly from this event. That's a vote of confidence in management and the strength of the business.
A long-term e-commerce powerhouse
There could be more bumps along the way. Even though it's the dominant player, it works in the kind of industry where upstarts can easily sprout and offer better technology. The global competitors who are still ahead of it can capture market share in the U.S.
Most acutely, it could suffer under a new tariff program, which has gotten investors worried. New tariffs could mean spending slowdowns in general, and if the Chinese deal changes and goes back to 145% tariffs, many of Shopify's clients could suffer, leading to a decrease in GMV and payment processing. Most of its millions of clients aren't likely to change their service packages, but Shopify makes the vast majority of its sales from payment processing. Its pivot to international could protect it somewhat from this potential, but that will take some time to become a larger part of its business.
Finally, Shopify stock is expensive. It recently traded at a forward one-year P/E ratio of 60 and price-to-free-cash-flow ratio of 83. That certainly takes some growth into account, making the stock susceptible to falling if something doesn't go right.
I wouldn't ignore the risks here, but the long-term potential far outweighs them, in my analysis. If you have some appetite for risk and a long-term time horizon, Shopify stock could reward you down the line.
