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
Bitcoin Drops to $70,000. U.S. Government Refuses to Bail Out Market, End of Bull Market or Golden Pit? The U.S. government refuses to bail out Bitcoin, and with Fed rate cuts nowhere in sight, a continued downward trend to test for a bottom is likely after a brief rebound.During the mid-da
Author  TradingKey
11 hours ago
The U.S. government refuses to bail out Bitcoin, and with Fed rate cuts nowhere in sight, a continued downward trend to test for a bottom is likely after a brief rebound.During the mid-da
placeholder
Bitcoin’s Drop to $69K Wipes Out 15 Months of Bull Market GainsPrecious metals' volatility mirrored Bitcoin's downturn as it targets lower price points.
Author  Mitrade
12 hours ago
Precious metals' volatility mirrored Bitcoin's downturn as it targets lower price points.
placeholder
Bitcoin Leverage Flush Evaporates $775M as Capital Rotates Into Defensive Infra PlaysBitcoin's plunge to $70K triggers a $775M leverage washout, driving a capital rotation into quantum-secure infrastructure project BMIC as investors seek uncorrelated alpha.
Author  Mitrade
13 hours ago
Bitcoin's plunge to $70K triggers a $775M leverage washout, driving a capital rotation into quantum-secure infrastructure project BMIC as investors seek uncorrelated alpha.
placeholder
Ethereum Price Forecast: ETH faces heavy distribution as price slips below average cost basis of investorsEthereum (ETH) extended its decline on Wednesday, dropping more than 5% over the past 24 hours toward the $2,100 level, which is below the $2,310 average cost basis or realized price of investors, according to CryptoQuant's data.
Author  FXStreet
19 hours ago
Ethereum (ETH) extended its decline on Wednesday, dropping more than 5% over the past 24 hours toward the $2,100 level, which is below the $2,310 average cost basis or realized price of investors, according to CryptoQuant's data.
placeholder
Bitcoin Rout. Bridgewater Founder Dalio Publicly Backs Gold.Gold returns to the $5,000 mark as Bitcoin prices weaken to hit new lows; what is the future outlook?During the Asian session on Wednesday (February 4), gold ( XAUUSD) prices continued to
Author  TradingKey
Yesterday 10: 07
Gold returns to the $5,000 mark as Bitcoin prices weaken to hit new lows; what is the future outlook?During the Asian session on Wednesday (February 4), gold ( XAUUSD) prices continued to
goTop
quote