Shares of North America's leading commerce enabler, Shopify (SHOP 6.17%), were 6% higher as of 3:30 p.m. ET Friday, according to data provided by S&P Global Market Intelligence.
This rise stems from an analyst at Wells Fargo raising their price target on the stock from $107 to $125, naming Shopify a "signature pick."
Although Nvidia, Palantir, OpenAI, and others capture most of the artificial intelligence (AI) fanfare, the analyst believes Shopify could prove to be a thematic AI story -- and I'd agree.
A burgeoning AI juggernaut?
In April this year, a leaked memo from Chief Executive Officer Tobi Lütke went viral. In it, he stated, "Before asking for more headcount and resources, teams must demonstrate why they cannot get what they want done using AI."
Although this focuses on incorporating AI into Shopify's operations, the quote highlights that AI will be at the heart of what the company does going forward, whether internally or through its products.
Image source: Getty Images.
In 2023, the company launched Shopify Magic, a toolbox of AI-powered solutions (think AI-generated product descriptions or email campaigns, automated chat help, or image editing). Then, it launched Sidekick -- an AI-driven commerce assistant -- in 2024 to help with areas such as inventory optimization, pricing strategies, and gathering business insights.
Just last quarter, Shopify launched TariffGuide.ai. This tool enables merchants to source products more effectively, allowing them to navigate the complex tariff environment in real time.
Adding over 600 new product features for its merchants in the last two years alone, Shopify appears likely to remain an AI innovator rather than a disruptee, in my opinion.
Though Shopify stock isn't cheap at 83 times cash from operations, its growth potential remains massive, holding only a 2% market share in its core geographies.
