Why Is Wall Street So Bullish on Shopify (SHOP)? There's 1 Key Reason.
Key Points
Shopify continues to report strong growth numbers, indicating a big market opportunity.
Higher revenue helped return the business to positive operating income.
- 10 stocks we like better than Shopify ›
During the five-year period leading up to its all-time high in November 2021, shares of Shopify (NASDAQ: SHOP) had surged 3,740% higher. The business was lifted by the pandemic as online shopping saw huge demand. This e-commerce stock might've diverged from reality, though.
Shares tanked in 2022, but now they're back on the upswing. In the past three years, the stock has rocketed 456% higher (as of Oct. 10). Why is Wall Street so bullish on Shopify? There might be one reason.
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Shopify is still registering fantastic growth
Investors are extremely optimistic thanks to durable growth that has accelerated. After the pandemic boom, Shopify's revenue increased by more than 20% in 2022, 2023, and 2024. And sales growth of 31% in the second quarter (ended June 30) was faster than the pace in the first quarter.
Gross merchandise volume continues to march higher, totaling $88 billion last quarter. This is a clear sign that the business has a very bright future as it further penetrates the e-commerce market on a global level.
Investors must be pleased with the bottom line
Shopify's impressive top-line growth has now resulted in profits. Operating income totaled $291 million in Q2. Not too long ago, this was a money-losing enterprise. It's become more financially sound.
Investors shouldn't rush to buy shares just yet. Shopify is a great company, but the stock prices in very lofty expectations.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.
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