We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Shopify Rallies 31% in 6 Months: Buy, Sell or Hold the Stock?
Read MoreHide Full Article
Key Takeaways
Shopify shares have jumped 31.3% in six months, outperforming the sector's 28.5% gain.
Stronger GMV, record MRR and rising international contribution are boosting Shopify's growth.
High valuation, rising rivalry and shares trading below the 50-day average temper Shopify's outlook.
Shopify (SHOP - Free Report) shares have appreciated 31.3% in the past six months, outperforming the Zacks Computer and Technology sector’s growth of 28.5%. This strong rally for one of the world’s leading commerce platforms naturally raises an important question: Should investors buy, hold or sell the stock at present? Let’s take a closer look at Shopify’s fundamentals and what they signal for the stock.
Diversified Merchant Base Supports Shopify’s Upside
Shopify’s strong and expanding merchant base remains a critical pillar supporting its long-term growth trajectory. In the third quarter, GMV increased by approximately 32% year over year, reflecting robust merchant activity and rising transaction volumes across the platform. Monthly recurring revenues also climbed to a new record, suggesting continued growth in paid subscriptions and higher ARPU as more merchants adopt advanced plans.
The quality of Shopify’s merchant ecosystem is also strengthening. The company is not only attracting new merchants but also seeing meaningful GMV contributions from merchants who have been on the platform for multiple years. This highlights the platform’s stickiness, strong retention and the increasing lifetime value Shopify derives as merchants scale their operations. At the enterprise level, the company is also attracting larger brands, which enhances revenue stability and supports higher monetization.
International expansion adds further momentum, with a disproportionate share of GMV growth coming from outside North America, particularly Europe. Meanwhile, deeper adoption of Shopify Payments, AI-powered tools like Sidekick, and cross-border and financing services continues to increase wallet share per merchant and strengthen operational reliance on the platform.
Together, these trends show that Shopify’s large, diverse and highly engaged merchant base provides a durable foundation for long-term growth, reinforcing the stock’s positive prospects.
Healthy Free Cash Flow Boosts SHOP’s Prospects
Shopify’s healthy and steadily improving free cash flow profile remains central to its long-term growth prospects. The company generated an 18% free cash flow margin in the third quarter of 2025, marking its ninth consecutive quarter of double-digit performance. Across the first nine months of the year, free cash flow margin held solid at 16%, highlighting the strength and consistency of Shopify’s cash-generating capabilities.
This momentum reflects disciplined execution, with margins rising from 15% in the first quarter to 16% in the second quarter before climbing back to 18% in the current quarter. Such stability provides Shopify with meaningful financial flexibility, enabling continued investment in product development, AI-driven innovations and global expansion.
Looking ahead, management expects the fourth-quarter free cash flow margin to come in slightly above its third-quarter levels, reinforcing confidence in the company’s ability to sustain strong cash flows as it scales.
Rising Competition Puts Pressure on Shopify
Shopify is increasingly feeling the impact of intense competition in global e-commerce. Amazon (AMZN - Free Report) , Adobe (ADBE - Free Report) and MercadoLibre (MELI - Free Report) are each expanding their platforms, creating pressure on Shopify’s market position and merchant retention.
Amazon remains the biggest competitive threat. Amazon is expanding “Buy with Prime,” strengthening its AI-powered shopping experience and attracting merchants with its massive customer base. Amazon’s fulfilment network, boosted by record Prime Day activity and faster delivery coverage, gives it a structural advantage that attracts sellers and speeds up its market share growth.
Adobe poses strong competition in the enterprise segment. Adobe Commerce is preferred by large, complex businesses that need deep customization and control. With powerful B2B features and extensive flexibility, it remains a compelling alternative for sophisticated merchants.
In Latin America, MercadoLibre presents another challenge. MercadoLibre continues to deliver strong GMV growth, supported by its integrated marketplace, logistics strength and Mercado Pago. This allows MercadoLibre to offer a seamless end-to-end ecosystem that competes directly for merchant share.
SHOP's Outperformed Competitors
Alongside the sector’s 28.5% growth, Shopify has also outpaced key competitors over the past six months. Amazon shares have risen 13.1%, while Adobe and MercadoLibre have declined 16.5% and 20.8%, respectively.
SHOP 6-Month Performance Chart
Image Source: Zacks Investment Research
Shopify Stock Is Overvalued
From a valuation standpoint, Shopify remains expensive, trading at a forward price-to-sales ratio of 14.95X, higher than the Zacks Internet Services industry’s average of 7.08X. This overvaluation is reflected in its Value Score of F.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
SHOP Shares Trade Below 50-Day SMA
Shopify shares are trading below the 50-day moving averages, indicating a bearish trend, suggesting limited upside in the near-term momentum for the stock.
Image Source: Zacks Investment Research
Conclusion: Stay on Hold for the Time Being
Shopify benefits from a growing and diversified merchant base and strong free cash flow, supporting long-term expansion across products, AI and global markets. But rising competition from Amazon, Adobe and MercadoLibre poses meaningful challenges. These rivals are strengthening their platforms, pressuring Shopify’s market share and merchant stickiness. At the same time, Shopify’s rich valuation, trading far above industry averages, raises concerns for investors despite solid fundamentals.
Image: Shutterstock
Shopify Rallies 31% in 6 Months: Buy, Sell or Hold the Stock?
Key Takeaways
Shopify (SHOP - Free Report) shares have appreciated 31.3% in the past six months, outperforming the Zacks Computer and Technology sector’s growth of 28.5%. This strong rally for one of the world’s leading commerce platforms naturally raises an important question: Should investors buy, hold or sell the stock at present? Let’s take a closer look at Shopify’s fundamentals and what they signal for the stock.
Diversified Merchant Base Supports Shopify’s Upside
Shopify’s strong and expanding merchant base remains a critical pillar supporting its long-term growth trajectory. In the third quarter, GMV increased by approximately 32% year over year, reflecting robust merchant activity and rising transaction volumes across the platform. Monthly recurring revenues also climbed to a new record, suggesting continued growth in paid subscriptions and higher ARPU as more merchants adopt advanced plans.
The quality of Shopify’s merchant ecosystem is also strengthening. The company is not only attracting new merchants but also seeing meaningful GMV contributions from merchants who have been on the platform for multiple years. This highlights the platform’s stickiness, strong retention and the increasing lifetime value Shopify derives as merchants scale their operations. At the enterprise level, the company is also attracting larger brands, which enhances revenue stability and supports higher monetization.
International expansion adds further momentum, with a disproportionate share of GMV growth coming from outside North America, particularly Europe. Meanwhile, deeper adoption of Shopify Payments, AI-powered tools like Sidekick, and cross-border and financing services continues to increase wallet share per merchant and strengthen operational reliance on the platform.
Together, these trends show that Shopify’s large, diverse and highly engaged merchant base provides a durable foundation for long-term growth, reinforcing the stock’s positive prospects.
Healthy Free Cash Flow Boosts SHOP’s Prospects
Shopify’s healthy and steadily improving free cash flow profile remains central to its long-term growth prospects. The company generated an 18% free cash flow margin in the third quarter of 2025, marking its ninth consecutive quarter of double-digit performance. Across the first nine months of the year, free cash flow margin held solid at 16%, highlighting the strength and consistency of Shopify’s cash-generating capabilities.
This momentum reflects disciplined execution, with margins rising from 15% in the first quarter to 16% in the second quarter before climbing back to 18% in the current quarter. Such stability provides Shopify with meaningful financial flexibility, enabling continued investment in product development, AI-driven innovations and global expansion.
Looking ahead, management expects the fourth-quarter free cash flow margin to come in slightly above its third-quarter levels, reinforcing confidence in the company’s ability to sustain strong cash flows as it scales.
Rising Competition Puts Pressure on Shopify
Shopify is increasingly feeling the impact of intense competition in global e-commerce. Amazon (AMZN - Free Report) , Adobe (ADBE - Free Report) and MercadoLibre (MELI - Free Report) are each expanding their platforms, creating pressure on Shopify’s market position and merchant retention.
Amazon remains the biggest competitive threat. Amazon is expanding “Buy with Prime,” strengthening its AI-powered shopping experience and attracting merchants with its massive customer base. Amazon’s fulfilment network, boosted by record Prime Day activity and faster delivery coverage, gives it a structural advantage that attracts sellers and speeds up its market share growth.
Adobe poses strong competition in the enterprise segment. Adobe Commerce is preferred by large, complex businesses that need deep customization and control. With powerful B2B features and extensive flexibility, it remains a compelling alternative for sophisticated merchants.
In Latin America, MercadoLibre presents another challenge. MercadoLibre continues to deliver strong GMV growth, supported by its integrated marketplace, logistics strength and Mercado Pago. This allows MercadoLibre to offer a seamless end-to-end ecosystem that competes directly for merchant share.
SHOP's Outperformed Competitors
Alongside the sector’s 28.5% growth, Shopify has also outpaced key competitors over the past six months. Amazon shares have risen 13.1%, while Adobe and MercadoLibre have declined 16.5% and 20.8%, respectively.
SHOP 6-Month Performance Chart
Image Source: Zacks Investment Research
Shopify Stock Is Overvalued
From a valuation standpoint, Shopify remains expensive, trading at a forward price-to-sales ratio of 14.95X, higher than the Zacks Internet Services industry’s average of 7.08X. This overvaluation is reflected in its Value Score of F.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
SHOP Shares Trade Below 50-Day SMA
Shopify shares are trading below the 50-day moving averages, indicating a bearish trend, suggesting limited upside in the near-term momentum for the stock.
Image Source: Zacks Investment Research
Conclusion: Stay on Hold for the Time Being
Shopify benefits from a growing and diversified merchant base and strong free cash flow, supporting long-term expansion across products, AI and global markets. But rising competition from Amazon, Adobe and MercadoLibre poses meaningful challenges. These rivals are strengthening their platforms, pressuring Shopify’s market share and merchant stickiness. At the same time, Shopify’s rich valuation, trading far above industry averages, raises concerns for investors despite solid fundamentals.
Given the mix of strengths and challenges, investors are advised to retain this Zacks Rank #3 (Hold) stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.