Is Shopify a Millionaire Maker?

Shopify (NYSE:SHOP) is an eCommerce platform, business services provider and payment processor that is used by millions of online merchants worldwide.

Like many tech companies, Shopify has seen its stock price tumble in recent weeks, with the stock’s 30-day losses currently sitting at 27.3%.

With that said, Shopify has turned in consistently good performance and appears to be building a wide competitive moat, so is SHOP a future millionaire maker now that it’s trading off of recent highs?

Shopify Growth Streak Is Scintillating

Shopify has been on an impressive growth streak for many years. Since going public in 2015, the company hasn’t had a single quarter in which its revenues declined on a year-over-year basis.

Even more impressive is the fact that revenue growth rates have been consistently in double-digit territory during that entire time. The lowest year-over-year revenue growth rate Shopify has ever posted was 15.7% in Q2 of 2022.

Net income growth hasn’t been quite as stable, but the company has been able to get past a string of steep losses in 2022 and 2023 to achieve increasingly consistent profitability. Six out of the last eight quarters have seen Shopify post positive net incomes, including the last three consecutively. Even more importantly, Q4 of last year saw the company report its all-time highest net income to date at $1.29 billion.

Speaking of Q4, the quarterly and full-year report for 2024 showed a continuation of strong performance at Shopify.

The company’s gross merchandise volume reached $1 trillion for the first time last year, and full-year revenues increased by over 25% to $8.88 billion. Free cash flow, meanwhile advanced by a blistering 76.5% to a total of $1.60 billion.

Crucially, Shopify saw strong revenue growth in the international and offline categories, two of the areas where it likely has the largest opportunities to mushroom. Offline payments are of particular interest, as Shopify is trying to expand its POS services to real-world business transactions. By becoming a major payment provider for brick-and-mortar sales, it has the potential to step beyond the eCommerce world.

Management also expects another year of significant growth ahead. Revenues are expected to increase by more than 20% in 2025, while free cash flow margin is expected to remain somewhere in the mid-teens. As such, Shopify could be in for yet another period of strong performance in the year to come.

Shopify’s Growing Moat

In addition to very strong financials, Shopify enjoys a wide and still-growing moat as the default eCommerce platform provider for businesses of all kinds and sizes.

In 2024, stores using Shopify served 875 million unique online customers. It also accounted for an impressive 12% of the total US eCommerce market. With small-scale entrepreneurship on the rise, Shopify is likely in for a long ride as the best and largest service provider for small online businesses.

Shopify’s moat has been built not only by its scale but also by the range of business services it now performs beyond simple online store building and payment processing.

Today, Shopify offers everything from shipping and fulfillment services to business loans meant to help its customers scale. On the consumer side, the buy now pay later system that Shopify has built in conjunction with Affirm has become a popular feature of Shopify-powered stores.

Shopify has also gone far beyond serving small business merchants, having become a go-to eCommerce platform among even some extremely large brands.

Companies including Kraft Heinz, Sephora, Raycon and Red Bull all use Shopify’s platform to power their online stores. This focus on larger customers has paid off considerably for Shopify, giving it some insulation from the often volatile world of smaller businesses.

Is Shopify Overvalued?

SHOP’s value metrics seem quite high at first glance, as the stock trades at 60.3x earnings, 13.8 times sales and 10.5x book value. While these metrics are extremely high for many businesses, we have to take some context into account in Shopify’s case.

To begin with, the fact that the company is only now achieving consistent profitability somewhat mitigates the extremely high P/E ratio. Shopify may be able to sustain P/E ratios that would be too high for the vast majority of more mature companies as earnings begin to climb.

The same concept largely holds true for the price-to-sales ratio. With Shopify’s extremely strong revenue growth history and its potential to continue increasing its sales quickly, investors can justify a fairly high multiple to sales.

This is especially true in light of its high and still-expanding net margin. A final point here is that the recent stock market selloff has brought Shopify’s price-to-sales ratio to about its lowest point since 2023.

Putting all the pieces of the jigsaw together points to Shopify being resaonably valued as long as the financials don’t unexpectedly crumble.

Analysts’ forecasts for the stock are also quite optimistic, with the average price target currently standing at $134.54. While the 43% upside this target implies from the most recent price of $94.01 is likely a bit exaggerated given the current market climate, it still appears that SHOP could have considerable upside over the coming year. Even if the stock reaches the lowest standing price target of $100, it would still gain over 6%.

Shopify’s Potential Pitfalls

The most obvious concern for Shopify shareholders in the near future is the possibility that declining consumer confidence and weaker economic growth could reduce spending on its platform.

Small businesses, in particular, are likely to feel the squeeze of higher input costs resulting from new tariffs and the effects of reduced consumer spending. While Shopify’s larger customers are likely quite a lot safer, the SMBs that make up much of its user base could be in for rough times.

It’s also worth noting that Shopify may very well be sensitive to the decisions of the Federal Reserve on interest rates. With inflation potentially picking up as the result of tariff costs, the central bank may decide to keep interest rates elevated for longer periods than the market currently expects.

As a high-growth company with a premium valuation, Shopify could see its share prices fall if an expected rate cut later this year doesn’t occur.

Is Shopify a Millionaire Maker?

For a stock to truly make millionaires out of ordinary retail investors, it must be able to compound at high rates over long periods of time. 100-baggers of this sort are few and far between, and Shopify probably doesn’t quite make it into that rather exclusive club of companies. With that said, a stock doesn’t need to be able to turn thousands into millions in order to be an excellent investment.

Right now, Shopify is delivering very strong revenue growth, its earnings are becoming more consistent and it has built a good moat for itself as an online business services provider. Although the stock trades at a fairly high price relative to current earnings and sales, there may well be a good deal of upside left in Shopify. So, while it may not quite make millionaires, SHOP appears to be a relatively good candidate to buy and hold at the moment.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.