Key Points
Shopify helps merchants create valuable and highly customized online stores.
The company’s financial results have been excellent in recent quarters.
Shopify has a long runway for growth and a strong moat.
10 stocks we like better than Shopify ›
If you had only $160 to invest in a single share of a company, which one would it be? Of course, the answer won’t be the same for every investor, given their different goals, strategies, and risk tolerance levels. Even if there is no universal pick, one growth stock that looks particularly attractive at this price is Shopify (NASDAQ: SHOP). The e-commerce leader has been firing on all cylinders, and there is plenty of growth fuel left in the tank. Here’s the rundown.
Shopify’s terrific business model
Most retail businesses, whether they primarily operate brick-and-mortar stores or online, can benefit from having an e-commerce website. It makes it much easier for prospective customers to find them through the magic of search engines. In fact, not having an online presence is a significant handicap for today’s businesses. That’s where Shopify comes in.
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Recognizing that most people aren’t web development experts, the company’s platform enables merchants to quickly and easily set up online storefronts. The process for a basic e-commerce website is relatively straightforward, but Shopify takes it a step further by offering a range of additional services. Most notably, the company has an app store where developers create highly specialized apps for every business need.
That allows merchants to customize their storefronts exactly how they see fit. Shopify has also adapted to modern commerce in other ways. It allows merchants to market and sell their products through major social media channels, which are veritable hubs of potential customers. Shopify has found immense success thanks to its offerings. Although the company experienced a brief slump several years ago, it has since bounced back. Shopify’s top line is growing at a good clip.
In the second quarter of 2025, the company’s revenue increased 31% year over year to $2.7 billion. The company’s free cash flow totaled $422 million, representing a 26.7% increase compared to the same period last year, while the free-cash-flow margin remained unchanged at 16%. Shopify’s gross merchandise volume (GMV) and net income also moved in the right direction. It’s no wonder the stock has risen significantly this year; however, there is still plenty of upside for investors who hold on to it for the long term. Here’s why.
A long runway for growth
The e-commerce market has grown significantly over the past two decades and is now worth trillions of dollars. However, it likely hasn’t peaked. For one, general economic growth leads to higher consumer spending, which is good for retail businesses. And when Shopify’s clients get more business, that’s good for the company, too, as it generally leads to a higher GMV and revenue.
Second, e-commerce breaks down geographical barriers and enables consumers and businesses that would otherwise never have come into contact to do so. Additionally, many companies offer fast and free shipping, even to remote locations. Online retail has significant advantages. That’s why analysts continue to project that the e-commerce market will grow rapidly for the foreseeable future.
And even beyond a time frame for which we can reasonably make predictions, the industry should maintain a solid upward trajectory. That means an expanding market for Shopify, which has already established itself as one of the leaders in its most important market, the U.S. Shopify boasts a 12% share of the e-commerce market in the country by GMV. In the second quarter, Shopify generated 63% of its revenue in the U.S. and 5% in Canada.
That’s despite the company’s presence in 175 countries. So, international expansion is yet another lucrative opportunity for the e-commerce leader. And although it faces stiff competition, Shopify benefits from switching costs for its main e-commerce offerings, while its app store displays network effects — two sources of a moat that should allow it to remain an e-commerce leader. The company has increased its market share over the years, demonstrating that Shopify can thrive in a competitive environment.
Lastly, some might point to Shopify’s high forward price-to-sales ratio of 18, whereas stocks are considered undervalued at 2 and under. Even accounting for Shopify’s fast top-line growth, this may seem prohibitively expensive. Perhaps this will make Shopify somewhat volatile in the short term, especially if it fails to meet expectations in the next few quarters. But I expect the stock to outperform the market over five years or more as it continues to make headway into the massive addressable market ahead.
So, Shopify remains an excellent stock to buy with $160 (shares are currently trading for slightly under $152) and hold for a long time.
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Prosper Junior Bakiny has positions in Shopify. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.
