Delivering strong financial results is usually enough to keep investors interested in a growth stock. But when a company consistently reports impressive numbers, the market can start expecting even more. That’s exactly what seems to be happening with Shopify (TSX: SHOP) right now.
Despite its strong business growth and improving profitability, the Canadian e-commerce giant has struggled to maintain upward momentum in its share price. What’s more surprising is that Shopify has underperformed the broader Canadian stock market by a huge margin over the last year.
This raises a big question about whether investors are expecting too much from the company. In this article, I’ll explore what’s restricting Shopify stock’s upside, what could help it regain strength, and whether its recent weakness offers an attractive buying opportunity for long-term investors.
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Why Shopify stock is struggling
Before digging into why Shopify’s stock hasn’t reflected its impressive growth, let’s review how the business has been performing recently.
At the time of writing, SHOP stock traded at $220.37 per share with a market cap of roughly $283 billion. While its shares have gained 34% over the last six months, the stock has still lost 9% of its value over the last year. By comparison, the TSX Composite Index has rallied 18% during the same period, clearly highlighting Shopify’s underperformance.
One possible reason behind this weakness is that Shopify’s consistently strong financial results have raised investors’ expectations considerably. When a company is already growing rapidly, even another excellent quarter might not be enough to impress the market.
In the second quarter of 2026, Shopify’s revenue jumped 34% year-over-year (YoY) to US$3.6 billion, backed by a 32% increase in gross merchandise volume to US$115.6 billion.
More importantly, the company’s operating income surged 68% YoY, while its free cash flow climbed nearly 55%. Its free cash flow margin also improved to 18% from 16% a year ago.
These impressive numbers reflect Shopify’s ability to expand its business while improving profitability. However, maintaining such rapid growth could become increasingly challenging as investors continue to demand stronger results.
What could help Shopify regain momentum?
With Shopify set to announce its third-quarter earnings on Tuesday, November 3, investors will soon get another opportunity to see whether the company could exceed the market’s already high growth expectations.
For the third quarter, Shopify previously projected revenue growth in the low-30% range and gross profit growth in the mid-to-high-20% range. It also expects its free cash flow margin to remain in the high teens to low twenties.
If the Canadian tech giant manages to exceed these targets while providing an encouraging outlook for the coming quarters, it could help revive investor confidence. At the same time, continued improvements in its profitability along with strong revenue growth would make its results even more encouraging for investors.
But we shouldn’t forget that even with its struggling stock, Shopify is continuing to focus on shareholder returns. In June, the company increased its share repurchase authorization by US$3 billion to US$5 billion. Such buybacks could gradually reduce its outstanding share count and support earnings, making Shopify stock more attractive to investors.
Is Shopify stock undervalued?
Despite its recent underperformance, I wouldn’t necessarily call Shopify stock undervalued simply because its share price has declined. With a market cap of over $280 billion, the company still carries a huge valuation, making its sustained earnings and cash flow growth even more important for supporting its share price.
That said, the company’s expanding merchant activity, improving operating profitability, and strong cash generation make its long-term growth outlook attractive. Meanwhile, Shopify’s continued focus on artificial intelligence (AI) and strengthening of its commerce platform could also create new opportunities for future expansion.
Foolish takeaway
In my opinion, Shopify remains an appealing growth stock for investors willing to ride out short-term volatility. While its current valuation doesn’t automatically make it a bargain, consistently strong earnings, healthy cash flow, and an upbeat outlook could help SHOP stock regain momentum and reward patient investors.
