The big picture trends in e‑commerce sales are clearly in Shopify’s favor. The global retail e‑commerce sales market is ballpark $6 trillion, up roughly 8 to 9% from the prior year. Forecasts show online sales worldwide could approach $7 trillion by 2025 and top $8 trillion by 2028.
China and the U.S. together produce $1 trillion in online sales each, but Southeast Asia and Latin America are quickly playing catch-up with the likes of Mercadolibre.
The United States provides a telling example of this trend. U.S. e‑commerce sales are on track to hit roughly $1.2 trillion in 2024, which would represent about 16% of all U.S. retail sales. Just five years ago, online sales were only half that amount, meaning e‑commerce in America has roughly doubled since 2019.
Even after the 2020-21 era pop, online retail is still growing in the high-single digits annually in the U.S. Importantly, at around 16% of total retail, there remains ample runway for e‑commerce to capture more share of consumer spending with some estimates put U.S. online penetration over 20%.
This broader industry growth creates a rising tide for platforms like Shopify. Every year, a higher baseline of consumer spending is up for grabs online, and Shopify’s extensive merchant network is in prime position to capture a slice of that expanding pie. So what does all that mean for shareholders, is it time to buy?
E-commerce Is Thriving
The estimate of U.S. retail e-commerce sales during the fourth quarter of 2024 grew 2.7% from the prior quarter to a total of $308.90 billion, whereas the total retail sales were estimated at $1,883.30 billion, reflecting an increase of 1.8% from the third quarter of 2024.
Also, the fourth quarter of last year e-commerce estimates were up 9.4% from the fourth quarter of 2023, against the slower growth of total retail sales. E-commerce sales in the fourth quarter of 2024 accounted for 16.4% of the total sales.
The above figures clearly point out that e-commerce is growing at a faster pace than the total retail market.
Shopify’s Revenue on The Rise
Shopify’s financial results spotlight how it fits in the crosshairs of the e‑commerce boom. Last year, Shopify’s revenue popped to about $8.9 billion, up 26% year-over-year.
This top line mushrooming accelerated as the year went on with the fourth quarter alone seeing revenue balloon 31% year-over-year to $2.81 billion, blowing away analysts’ expectations. Such growth is a testament to strong holiday season sales and Shopify’s ability to attract more merchants and generate more business from existing merchants.
A particularly important figure for Shopify is Gross Merchandise Volume, the total value of all goods sold through Shopify’s platform.
Last year, Shopify’s merchants processed a massive $292.3 billion in GMV, marking a 24% jump from the prior year. This spike in merchant sales actually accelerated throughout the year, culminating in the strongest annual GMV growth rate Shopify has seen since 2021.
In the critical holiday quarter alone, GMV hit $94.5 billion, a 26% year-over-year increase, as consumers flocked to online stores for their year-end shopping.
Is Shopify Stock Still a Buy in 2025?
Analysts strongly suggest that Shopify will experience a major upside this year. Shopify’s median 12-month target price is $121.34, implying an upside of 24.2 percent from the current price of $98.57. 23 out of 38 analysts have rated Shopify as a Buy, whereas 14 stated a Hold rating.
The stock is trading at a 66.79x forward non-GAAP P/E and 11.77x forward Price/Sales, significantly higher than the industry averages.
Wall Street’s view on Shopify is generally bullish, though there is a fiery debate around the stock’s valuation. Following Shopify’s strong results last year, at least a couple of analysts raised their price targets going into 2025. Analysts at JPMorgan have noted that demand for Shopify’s solutions are likely to accelerate further as new AI-driven tools make online commerce even more powerful and as companies invest in modernizing their online storefronts.
The consensus 12-month price target for Shopify stock hovers around its current trading range, reflecting expectations of persistent growth. A majority of professional analysts rate the stock a “Buy” or “Outperform,” citing Shopify’s strong execution and long runway for expansion in a secular growth industry.
That said, valuation is a bit of a concern. After the stock’s significant run-up, Shopify trades at a premium that gives some investors pause. By traditional metrics, the stock isn’t cheap: Shopify’s shares currently command a forward price-to-earnings ratio on the order of 80+ and a forward price-to-sales ratio around 14–15x.
In other words, investors are paying about $15 for every $1 of next year’s expected revenue, a rich multiple, even in the high-growth tech realm.
This lofty valuation implies that a lot of future growth is already “priced in” to the stock. For comparison, e‑commerce peer Amazon trades at a much lower multiple of its sales (given its larger scale and slower growth, and typical software companies with high growth usually sport lower P/S multiples but tend to have higher gross margins than Shopify.
Some analysts argue that because a portion of Shopify’s revenue comes from merchant services, which have lower margins than pure software sales, using a simple price-to-sales metric might overstate the valuation premium. Even on a price-to-gross-profit basis, however, Shopify stock is valued around 29 times its 2025 gross profit forecast, still on the high side.
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.
