Is Shopify Stock a Buy After Its First Record Close in Nearly a Year?

Shopify (NASDAQ:SHOP) stock closed at $179.22 on Monday, its first record close in nearly a year. But the margin was small -- just 21 cents over the e-commerce software company's prior best of $179.01, set on Oct. 29, 2025.

Plenty happened between the two closes. The growth stock shed nearly half its value by mid-May, closing as low as about $95, and it's gained about 88% since then. As I write this, shares trade right around Monday's level.

That means investors buying now pay almost exactly what buyers paid at the last record. What they get for that price, though, has changed.

Image source: Getty Images.

The record came without new results

Monday's rise of nearly 5% capped a climb of around 18% over just six trading days. But it didn't come with any new numbers from Shopify. The company hasn't released financial results since Aug. 5, and its next report isn't due until Nov. 3.

Instead, shares seemed to get a boost from positive Wall Street comments on artificial intelligence (AI) shopping agents. They're programs that can find and buy items on a shopper's behalf. Shopify has spent this year making its merchants' products available to those agents, and AI-driven orders to Shopify stores in the second quarter were triple the year-ago level.

But management itself has been careful about how much this means so far.

"[W]hile the volume from agentic commerce is still small relative to our massive [gross merchandise volume], the growth trends are impressive," Shopify president Harley Finkelstein said on Shopify's second-quarter earnings call.

Put another way, the excitement that helped drive shares to a record is about a channel that still makes up a small slice of the sales on Shopify's platform. I think the stronger case for the stock is in the numbers the company has already released.

A bigger business

Showing how much Shopify has grown between those two records, its revenue in the 12 months through June was around $13.3 billion, up about a third from the 12 months before that. And growth has accelerated along the way. Year-over-year revenue growth over the past four quarters was 32%, 31%, 34%, and 34%. Management's guidance calls for growth in the low 30s again in the third quarter. For a business this big, holding above 30% for more than a year is impressive.

Profits are climbing even faster. Second-quarter operating income surged 68% year over year to $488 million, and free cash flow (cash flow from operations minus capital spending) rose 55% to $654 million. That was 18% of revenue, up from 16% a year earlier, but an accounting change boosted the latest quarter's free cash flow by $37 million.

In the trailing 12 months, free cash flow totaled almost $2.4 billion -- around 29% higher than Shopify had posted at this time last year.

Plus, Shopify's board raised the company's share buyback authorization to $5 billion in June.

Still too expensive?

This all makes the stock cheaper than it was the last time it closed at this price. At the October 2025 record, Shopify's market cap was around 128 times its trailing-12-month free cash flow. Now, with a market cap of about $230 billion, it's about 98 times free cash flow. The stock's forward price-to-earnings ratio (its price versus next year's expected earnings) is around 73.

But that doesn't make the stock cheap. A price of 98 times free cash flow arguably assumes years of fast growth. Even if Shopify's free cash flow rose 30% annually for three more years, today's market cap would still be around 45 times that bigger free cash flow number.

After the October 2025 record close, shares dropped about 47% in a bit over six months, even though Shopify's revenue growth never slipped below 31% in that time. A stock this pricey might fall hard again even if the business keeps doing OK.

Also, management expects third-quarter gross profit to grow in the mid-to-high 20s. That's slower than revenue, mostly because lower-margin payments revenue keeps outgrowing subscriptions.

In the end, Shopify is a great business, and at around $179 a share it's arguably a better value than it was the last time it traded here. But I don't think even growth in the low 30s justifies paying 98 times free cash flow. For now, I think the stock is still too expensive to buy.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.