Shopify (TSX:SHOP) has been on a wild ride over the past year, and investors are wondering whether 2025 is the time to buy, sell, or hold. The stock has seen massive gains, nearly doubling in the past six months alone! This impressive rally has been driven by strong revenue growth. An improving margin outlook and increasing optimism around Shopify stock’s ability to expand beyond small businesses into the enterprise space. However, its valuation remains a major concern, with shares trading at high multiples compared to peers. So, what should investors do now?
Into earnings
In its most recent earnings report, Shopify posted a 24% jump in gross merchandise volume (GMV). This is a key metric indicating the total sales flowing through its platform. This marked the fifth straight quarter of GMV growth above 20%, demonstrating Shopify stock’s continued strength in e-commerce. Plus, quarterly revenue surged by 26% year over year, while operating income more than doubled from the same period last year.
Beyond its recent earnings, Shopify stock’s past performance has been defined by explosive growth and adaptability. The company has successfully positioned itself as a dominant player in e-commerce by enabling businesses of all sizes to build and scale online stores. Over the years, it has expanded its ecosystem with Shopify Payments, Shopify Plus, and various artificial intelligence (AI)-powered tools to enhance merchant capabilities. However, its stock has often been volatile, experiencing major drawdowns in 2022 and 2023 before rebounding strongly in 2024. While some investors see this as a sign of resilience, others worry about the long-term sustainability of such price swings.
Future outlook
Looking ahead, Shopify stock’s future outlook remains positive, but challenges persist. Analysts expect operating income to grow at a compound annual rate of 41% over the next five years. Outpacing many of its competitors. Furthermore, Shopify’s focus on enterprise clients could provide more stability and predictable revenue streams. This shift toward larger businesses represents a major opportunity. But also comes with longer sales cycles and higher customer acquisition costs. If Shopify can successfully scale in this segment, it could unlock another wave of growth.
Yet one of the biggest concerns for investors is Shopify’s valuation. The stock trades at a forward price-to-earnings (P/E) ratio of 80.65, significantly higher than peers 35.7. While Shopify stock has a strong track record of growth, these elevated multiples make it more susceptible to sell-offs if earnings disappoint. Some analysts argue that Shopify’s premium valuation is justified given its strong revenue expansion and improving profitability. Meanwhile, others believe the stock is overextended and could face a correction.
Another reason investors are optimistic is Shopify stock’s increasing use of AI. The company has been integrating AI into its platform to enhance marketing, sales, customer support, and operations, which could help businesses generate more revenue with fewer resources. This AI-driven strategy aligns with broader industry trends and has the potential to boost Shopify’s profitability faster than its expenses, making it a compelling long-term growth play.
In addition to AI, Shopify is strengthening its logistics and payments infrastructure, further solidifying its moat in the e-commerce industry. The company’s ability to offer seamless, end-to-end solutions for merchants gives it a competitive advantage over smaller e-commerce platforms. If Shopify can continue refining these services, it could attract more businesses looking for an all-in-one solution.
Foolish takeaway
Ultimately, whether Shopify stock is a buy, sell, or hold in 2025 depends on your investment strategy. If you’re a long-term investor with a high-risk tolerance, Shopify’s strong growth trajectory, improving margins, and enterprise expansion strategy make it an attractive option. However, if you’re more conservative or concerned about valuation, it may be wise to wait for a pullback before entering a position. Those who already own Shopify stock might consider holding on, given the company’s positive outlook, while remaining aware of potential volatility.
