Is Shopify Stock a Buy, Sell, or Hold in 2025?

Source The Motley Fool

Shopify (NYSE: SHOP) has arguably become the most prominent U.S.-based e-commerce stock behind Amazon. A fast, easy-to-use sales site and an extensive ecosystem helped it stand out above most other e-commerce platforms.

While the stock experienced modest gains over the last year, it has risen nearly 300% from its bear market lows in 2022. Despite those healthy gains, it sells at more than a 40% discount from its all-time high set in 2021.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

Considering the state of its business and financials, the question of whether Shopify stock is a buy, sell, or hold likely warrants a deeper dive.

The state of Shopify's stock

At this point in Shopify's history, it appears to have moved on from a mistake earlier in the decade that likely compounded the stock's huge pullback in 2022.

The decision to create an ecosystem of services for online merchants has served it well on balance. Add-ons such as payment services, online marketing, and sales tracking have allowed Shopify to drive added revenue from its existing customer base. So successful is this approach that 72% of the company's revenue in the first nine months of 2024 came from this merchant services segment.

Nonetheless, it likely took merchant services too far when it started the Shopify Fulfillment Network (SFN). Aside from the fact that fulfillment and shipping are far outside its core software business, such a business also involves massive fixed costs. Consequently, those costs made Shopify a money-loser after having recently turned profitable.

Seeing the effects on the overall business, Shopify sold the SFN. Although it still exists in name, a company called Flexport owns and manages that part of the operation. That has given Shopify the best of both worlds, giving its customers fulfillment services while allowing the company to return to profitability.

Also helping Shopify is the outlook for the e-commerce industry. To that end, Grand View Research forecasts a compound annual growth rate (CAGR) for the e-commerce industry of 19% through 2030. If that prediction is anywhere close to coming true, it should bode well for Shopify's revenue and, ultimately, its stock performance for years to come.

Shopify's financial changes

As mentioned before, the stock still trades at a considerable discount from its record high. Unfortunately for investors, its growth rate slowed significantly over the last decade, making a recovery more challenging.

In the first nine months of 2024, Shopify's $6.1 billion in revenue rose 23% from year-ago levels. While impressive, it lags the 47% revenue growth rate in the first three quarters of 2019, before the pandemic.

Nonetheless, as mentioned before, Shopify now has something it did not have in 2019: a positive net income. Its $726 million in profit in the first three quarters of 2024 is up from the $525 million loss in the same year-ago period. Moreover, even though analysts predict a 23% revenue growth rate in 2025, it could spark a more significant growth in net income that could take its stock price growth higher.

The valuation metrics offer a more mixed picture. Its P/E ratio is 97, and even when looking at the price-to-sales (P/S) ratio, it is still at a relatively high 16 times revenue.

Still, Amazon routinely sold at a higher P/E ratio in its growth phase, implying Shopify could sustain such an earnings multiple. Additionally, Shopify stock often sold for above 40 times sales during the pandemic, so its sales multiple is still far below record highs. This indicates improving financials and expanding multiples could still take Shopify stock higher in the foreseeable future.

Should you buy, sell, or hold Shopify stock?

Under current conditions, Shopify stock should remain a buy. Admittedly, the rising valuation and the slowing growth in recent years might turn investors cautious, and for that reason, new buyers should consider a dollar-cost averaging approach to buying.

However, Shopify has become one of the most impactful online shopping platforms in both the U.S. and the world, and the e-commerce industry is on track for continued growth for at least the rest of the decade. That should bode well for investors and could spark a continued recovery in the stock that takes it back to its record highs and beyond.

Should you invest $1,000 in Shopify right now?

Before you buy stock in Shopify, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Shopify wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $832,928!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of January 13, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Will Healy has positions in Shopify. The Motley Fool has positions in and recommends Amazon and Shopify. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Dollar holds above 100 near a 3-month high — three Fed speakers and a $69 billion auction land tonightThe dollar index closed at 100.43 on Monday, its highest close since late July, after a weekly gain of about 1% — the best in more than three months — and is holding above the 100.00 handle in Asia. Three Fed officials speak tonight alongside a $69 billion two-year note auction, the first leg of $183 billion of Treasury supply this week.
Author  Suzie
Sep 22, Tue
The dollar index closed at 100.43 on Monday, its highest close since late July, after a weekly gain of about 1% — the best in more than three months — and is holding above the 100.00 handle in Asia. Three Fed officials speak tonight alongside a $69 billion two-year note auction, the first leg of $183 billion of Treasury supply this week.
placeholder
October hike odds climb toward 60% as Goldman and BofA both flip — what Warsh's "dose of accommodation" really changedRate futures now price roughly 55% to 62% for a 25bp hike at the October 27-28 FOMC, up from about 30% before Chair Warsh's post-meeting framing that the Fed is merely "removing some accommodation." Goldman Sachs has added an October hike to its forecast and Bank of America now sees moves in both October and December. Here is the repricing, the language behind it, and the two data points that decide it.
Author  Irene Q.
Sep 23, Wed
Rate futures now price roughly 55% to 62% for a 25bp hike at the October 27-28 FOMC, up from about 30% before Chair Warsh's post-meeting framing that the Fed is merely "removing some accommodation." Goldman Sachs has added an October hike to its forecast and Bank of America now sees moves in both October and December. Here is the repricing, the language behind it, and the two data points that decide it.
placeholder
Memory chips surge, Nasdaq notches a second straight record close — why the Dow fell 185 points anywayMicron gained 5%, SanDisk 6.8%, Seagate 4% and Western Digital 3% as the memory complex led the Nasdaq Composite to a second consecutive record close of 27,244.28. But the Dow fell 185 points as JPMorgan, Wells Fargo and Schwab slid more than 3% each — a split tape that says more about positioning than about the economy.
Author  Irene Q.
Sep 23, Wed
Micron gained 5%, SanDisk 6.8%, Seagate 4% and Western Digital 3% as the memory complex led the Nasdaq Composite to a second consecutive record close of 27,244.28. But the Dow fell 185 points as JPMorgan, Wells Fargo and Schwab slid more than 3% each — a split tape that says more about positioning than about the economy.
placeholder
US input costs rose at the fastest pace in four years — the September flash PMI beat is an inflation story, not a growth storyUS September flash PMIs came in far above expectations, with the composite at 58.4, a five-year high. But the detail that moved markets was input cost inflation at its fastest since October 2022, driven by fuel, transport and supply shortages. Brent is back above $100 and the 10-year Treasury yield has hit its highest since 2007.
Author  Suzie
Sep 24, Thu
US September flash PMIs came in far above expectations, with the composite at 58.4, a five-year high. But the detail that moved markets was input cost inflation at its fastest since October 2022, driven by fuel, transport and supply shortages. Brent is back above $100 and the 10-year Treasury yield has hit its highest since 2007.
placeholder
Gold Price Forecast: Gold Drops Below $4,300, Will It Continue to Fall? As of the European session on September 24, gold prices (XAUUSD) extended their correction, dipping below $4,300 intraday to hit a low of $4,262.45. After previously rebounding close to $
Author  TradingKey
Sep 24, Thu
As of the European session on September 24, gold prices (XAUUSD) extended their correction, dipping below $4,300 intraday to hit a low of $4,262.45. After previously rebounding close to $
goTop
quote