Shopify's 15.14X P/S Suggests Premium Valuation: Buy the Stock?

Shopify SHOP shares are currently trading at a premium, as suggested by the Value Score of F. The stock is trading at a premium, with a forward 12-month price/sales (P/S) of 15.14X compared with the Zacks Computer and Technology sector’s 6.9X and the Zacks Internet Services industry’s 6.37X.

Shopify is trading at a significant premium compared with peers, including Amazon AMZN, Wix.com WIX and Commerce.com CMRC. In terms of forward 12-month P/S, Amazon, Wix.com and Commerce.com are currently trading at 3.01X, 3.53X and 1.05X, respectively.

SHOP Trades at Premium

Year to date (YTD), Shopify shares have outperformed the broader sector, industry and peers, including Amazon, Wix.com and Commerce.com. SHOP shares have appreciated 43.8% YTD compared with the broader sector’s return of 22.9% and the industry’s rise of 28.8%. Amazon, Wix.com and Commerce.com shares have dropped 1.4%, 35.7% and 23.7%, respectively, on a YTD basis.

SHOP Stock’s Performance

The outperformance can be attributed to Shopify’s expanding merchant base. New merchant-friendly tools, such as Shop Minis, Shop Cash and Sign in with Shop, as well as Shop Pay solutions, are helping SHOP win merchants regularly. Merchant solutions revenues in the second quarter of 2025 were $2.02 billion, up 36.6% on a year-over-year basis, driven by strong Gross Merchandise Volume and increased penetration of Shopify payments.

Expanding International Footprint Aids SHOP’s Prospects

Shopify’s growing international footprint is a key catalyst. International GMV grew 42% year over year in the second quarter of 2025, with Europe leading the charge (currently one-fourth of Shopify’s business). Shopify Capital is now available in Germany and the Netherlands, providing more merchants with access to growth funding. The company also launched Shop Pay Installments in Canada.

Shopify’s growing popularity is driving clientele that includes Starbucks, Canada Goose, Burton Snowboards, Michael Kors, Miele, Beachbody and Signet Jewelers. Shopify is leveraging AI to transform how consumers discover and shop for products. 

The company’s investment in AI-driven tools, such as AI store builder, Catalog, Universal Cart and Sidekick, is helping merchants improve customer engagement and streamline operations. Infusion of AI into Shop search and the home feed is helping buyers see the right products at the right time, driving higher engagement and conversion.

Rich Partner Base to Drive SHOP’s Growth

Shopify’s rich partner ecosystem has been a major growth driver. An expanding partner base, which includes Microsoft, TikTok, Roblox, PayPal, Snap, Pinterest, Criteo, IBM, Cognizant, Google Cloud and Adayen, has further expanded its merchant base.

SHOP has diversified its payment product offerings through an expanded partnership with PayPal. Shopify’s partnership with Microsoft involves the integration of Shopify’s Checkout Kit into Microsoft’s Copilot, a major player in the AI space. This integration allows merchants to embed their checkout process directly within Microsoft’s AI-driven platform, enabling seamless shopping experiences for users. 

In partnership with Coinbase, Shopify is allowing consumers to pay with USDC on Base (Coinbase’s Ethereum layer-2 network) through Shopify Payments, bringing on-chain payments to millions of storefronts.

SHOP’s 2025 Earnings Estimates Revisions Are Steady

The Zacks Consensus Estimate for SHOP’s 2025 earnings is currently pegged at $1.45 per share, unchanged over the past 30 days and indicating year-over-year growth of 11.54%. 

Shopify Inc. Price and Consensus

 

Shopify Inc. price-consensus-chart | Shopify Inc. Quote

The consensus mark for SHOP’s 2025 revenues is currently pegged at $11.25 billion, implying a year-over-year rally of 26.68%.

The Zacks Consensus Estimate for 2025 Merchant solutions’ revenues is currently pegged at $8.49 billion, suggesting 30% growth from 2024’s reported figure. The consensus mark for Subscription solutions revenues for 2025 is currently pegged at $2.76 billion, indicating 17.4% growth from the 2024 reported figure.

Here’s Why Shopify Is a Buy Right Now

SHOP is benefiting from strong growth in its merchant base and an expanding international footprint. Based on these factors, Shopify expects revenues for the third quarter of 2025 to grow in the mid-to-high twenties percentage rate on a year-over-year basis.

Moreover, a strong cash balance, $5.82 billion as of June 30, and improving free cash flow margin (up 100 basis points sequentially in the second quarter of 2025) reflect strong liquidity. Shopify expects the free cash flow margin to be in the mid to high-teens for the third quarter of 2025.

Shopify currently sports a Zacks Rank #1 (Strong Buy) and has a Growth Score of B, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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