Investors in Shopify (SHOP 1.37%) have gone on a wild ride in the last five years. The e-commerce software and payments platform saw surging growth and a meteoric rise in its stock price during the COVID-19 pandemic before crashing down to earth in 2022. Shares went from close to $170 to below $30 in less than two years. Now, the stock is rising again, hitting recent highs of over $150 after positing strong growth yet again in the second quarter of 2025.
But still, Shopify shareholders remain underwater if they bought at most points in 2021. Does that mean the stock is a buy today after its recent post-earnings pop?
NASDAQ: SHOP
Key Data Points
Accelerating global growth
Even though inflation has come down and consumer spending growth has slowed in the United States, Shopify's revenue growth is accelerating. It is doing so by gaining market share of e-commerce and retail spending in the United States while expanding to new markets such as Europe. Last quarter, revenue grew 31% year over year to $2.68 billion, compared to 21% growth in the year-ago period. Payment volume in Europe -- which correlates closely to revenue -- grew 42% and greatly outpaced overall sales.
Why are more and more businesses such as Starbucks and Canada Goose adopting Shopify's software tools? Because of its wide breadth of products that help grow their businesses, outsourcing an important function (having your own online storefront) to a trusted third party. Not every sale is going to come from Amazon, while some companies don't want to sell on broad-based marketplaces at all. Shopify's tools help businesses process payments and grow earnings, which leads to more revenue for Shopify as it takes a cut of every transaction.
This is a self-reinforcing cycle that has helped Shopify's revenue grow from well under $1 billion to $10 billion in less than 10 years, making it one of the fastest-growing businesses in the world.
Image source: Getty Images.
Expanding products and margin expansion potential
Shopify is not resting on its laurels. It is building new services to grow with its customer base. This includes connections with artificial intelligence (AI) query services to help pull products from its commerce partners when users ask chatbots questions. Everything comes back to driving more sales through e-commerce websites, which has driven total payment volume on Shopify partner websites from under $1 billion in 2012 to $327 billion in the last 12 months.
What's more, Shopify is now moving beyond payments for commerce partners through Shopify Campaigns, an advertising service. These campaigns can go on traditional channels such as Google or Instagram but also on the native Shop application. Shop is a mobile app from Shopify that acts as an aggregator for its e-commerce partners, similar to Amazon. This is a bold new venture in building a consumer-facing application but greatly expands Shopify's addressable market.
Add everything together along with the core tailwind of its e-commerce market share gains and Shopify should be able to grow its revenue at a double-digit rate for a long while. In 2025, it expects to grow revenue between 25% and 30% compared to 2024. Right now, Shopify's operating margin is 15.4%. As a payments and software company with low overhead, increasing scale should lead to improving profit margins for Shopify in the years to come. This can help underlying earnings grow even faster than revenue.
SHOP PE Ratio (Forward) data by YCharts
Should you buy Shopify stock?
After looking through the financials, it is clear that Shopify is a great business. This is why the stock price is up 5,000% since its initial public offering (IPO) around 10 years ago.
That does not necessarily make the stock a buy, though.
Shopify's stock trades at a forward price-to-earnings ratio (P/E) of about 76. This metric takes the current market cap of $185 billion and divides it by consensus estimates of $1.84 per share for net income over the next 12 months. This is already factoring in Shopify's expected strong revenue and earnings growth in the coming quarters. It will be many years before this lofty P/E ratio gets down to the average level of 20 to 30 for large-cap stocks listed in the United States.
At a market cap pushing $200 billion and only $10 billion in trailing revenue, Shopify stock looks overvalued, even though the business is firing on all cylinders. You should avoid buying shares of this company after its post-earnings pop.
