1 Growth Stock Down 25% in 2026 to Buy and Hold

After crushing the market in 2025, Shopify (NASDAQ: SHOP) has had a very different experience this year, at least so far. The stock is down 25% since 2026 started.

Will the e-commerce specialist bounce back this year? Maybe it will, maybe it won't. Regardless of what happens over the next 10 months, though, Shopify looks like a terrific buy-and-hold option for long-term investors.

Let's consider why that is.

Image source: Getty Images.

The problem with Shopify

Shopify's financial results were strong throughout 2025. Even the company's latest quarterly update, for the fourth quarter of 2025, was solid. The e-commerce leader's revenue jumped 31% year over year to $3.7 billion.

The issue with Shopify is that the market already expected it to perform that well. The company is trading at 65.6x times forward earnings.

At these levels, there is no room for error. With the company's net income and free cash flow margin declining in the fourth quarter -- and free cash flow predicted to drop even more during the fiscal year 2026 -- investors were a bit spooked. True, Shopify's bottom line in Q4 2025 declined due to the effect of equity investments. That hardly says much about the company's day-to-day core e-commerce business.

Even so, and especially given valuation concerns, lower earnings do matter. These factors explain why Shopify's stock dropped this year.

Looking beyond the issues

Here's some good news. Shopify now accounts for about 14% of the U.S. e-commerce market, up from 12% about a year ago. The company achieved this feat thanks to an easy-to-use platform that grants merchants significant flexibility to build online storefronts and nearly endless customization options through an app store with thousands of options.

Valuation may be an issue for now, but Shopify has historically been a fairly expensive stock.

SHOP PE Ratio (Forward) data by YCharts. PE = price-to-earnings.

Being one of the leaders in its niche within a large, rapidly growing market, while posting robust top-line growth, will earn almost any company a premium. Furthermore, there is significant room to grow in the e-commerce industry, which has yet to capture even 20% of total retail sales in the U.S.

What about competition? Shopify has increased its market share despite a ruthlessly competitive environment, and the company boasts a strong competitive edge thanks to high switching costs.

Lastly, Shopify is improving its platform thanks to artificial intelligence (AI)-powered services that could pay off down the road. That includes an AI store builder that can do the job in seconds with just a few keywords. Initiatives like these can attract even more business to its platform.

That, combined with the large addressable market ahead, paints a bright picture for Shopify's future. That's why, despite dropping 25% this year, the stock is still worth investing in for the long haul.

Prosper Junior Bakiny has positions in Shopify. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.