Shopify (TSX:SHOP) has been one of Canada’s top-performing large-cap stocks over the past year. Investors who held shares of this omnichannel commerce platform provider through the last 12 months have enjoyed impressive gains, with the stock soaring more than 94%. However, like much of the broader market, Shopify wasn’t immune to macroeconomic headwinds. Concerns over recession, led by tariff-related challenges, triggered a pullback in its share price.
Nonetheless, investors’ sentiment on this Canadian tech company has improved recently, as fears of a global recession have eased. This has led to a swift recovery in SHOP stock. Moreover, the company delivered strong first-quarter (Q1) financials, another positive.
While the stock has already outpaced broader equity markets, the underlying strength of its business signals potential for further significant gains over the next three years.
Image source: Getty Images
Shopify’s solid Q1 metrics
Shopify has once again delivered solid financials. For the first quarter (Q1), the company reported a 27% increase in revenue alongside a healthy 15% free cash flow margin. Shopify has now notched up eight straight quarters of over 25% revenue growth and seven consecutive quarters where Gross Merchandise Volume (GMV) has grown by more than 20%. Importantly, this growth has come with consistent improvements in free cash flow, highlighting the company’s ability to scale profitably.
Several growth drivers stood out in Q1. Shopify’s offline GMV surged 23%. Further, the business-to-business (B2B) segment delivered another triple-digit growth quarter, with GMV soaring 109%. This reflects Shopify’s growing influence in B2B commerce.
International markets are also supporting Shopify’s growth, with the segment’s GMV growing 31% year over year. Cross-border transactions remained strong. This growth reflects healthy contributions from both new and existing merchants. This broad-based strength led to the seventh consecutive quarter of GMV growth above 20%.
A key pillar of Shopify’s business remains Shopify Payments, which continues to be the company’s largest product offering and a significant growth engine. In Q1, Shopify Payments GMV penetration climbed to 64%, reflecting increased adoption across its merchant base. The company also expanded its payments platform into 16 new markets.
Shopify’s solid Q1 metrics reflect its position as a leading player in the omnichannel commerce landscape.
Shopify to sustain its growth momentum
Shopify’s growth momentum shows no signs of slowing, with its international expansion driving strong performance. The company is rapidly gaining market share across Europe, Asia, and Latin America, as seen in Europe’s 36% year-over-year GMV growth in Q1.
Product enhancements are boosting Shopify’s appeal to merchants while increased marketing deepens its global reach.
Offline sales are also thriving, fueled by growth from mid-market, multi-location merchants and high-volume brands. Shopify’s strategic move upmarket is paying off as more established brands join its platform, signalling that the segment has further growth opportunities.
Looking ahead, Shopify’s Q2 guidance reflects confidence in this momentum. Its GMV is growing at a healthy pace. Moreover, revenue is projected to grow in the mid-20s percentage range year over year, while gross profit dollars are expected to rise in the high teens.
Despite potential macroeconomic headwinds, Shopify’s growing merchant base, international expansion, and solid operating metrics suggest that it will continue to deliver strong financials and grow its free cash flow margins.
Shopify stock could hit $494 in 3 years
Shopify is well-positioned to capitalize on the shift toward omnichannel platforms. Over the past three years, its stock has delivered a stellar return of 196.2% and grown at a compound annual growth rate (CAGR) of 43.5%. If this pace continues, Shopify’s current share price of $153.93 could climb to around $493.97 or approximately $494 within the next three years.
It’s reasonable to expect some moderation in growth as the company matures. However, even if Shopify’s growth slows to a more conservative CAGR of 18%, the stock could still reach approximately $253 over the same period.
