Shopify Inc. (SHOP): A Bull Case Theory

We came across a bullish thesis on Shopify Inc. on Uncle Stock Notes’s Substack. In this article, we will summarize the bulls’ thesis on SHOP. Shopify Inc.'s share was trading at $158.64 as of November 28th. SHOP’s trailing and forward P/E were 116.65 and 87.72 respectively according to Yahoo Finance.

Shopify Inc., a commerce technology company, provides tools to start, scale, market, and run a business of various sizes in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. SHOP has completed its transformation from a capital-intensive logistics operator into a lean, asset-light platform, delivering strong third-quarter results that underscore the success of this shift.

Revenue grew 32% year-over-year to $2.84 billion, with Gross Merchandise Volume (GMV) rising to $92 billion, while GAAP operating profit surged to $343 million. Free cash flow reached $507 million, marking the ninth consecutive quarter of double-digit FCF margins at 18%. The company’s growth is now driven primarily by merchant solutions, which account for 75% of total revenue and include Shopify Payments, Shopify Capital, and Shopify Markets, reflecting a strategic shift from subscription-based SaaS to transaction-based revenue. Shopify Payments processed $53 billion this quarter, achieving a 58% penetration rate and generating a stable, high-margin income stream.

Shopify Capital, providing loans to SMBs, grew rapidly but incurred $148 million in transaction and loan losses, up 155% year-over-year, highlighting heightened credit risk. Subscription solutions, while still growing at 15% revenue year-over-year, saw MRR growth slow to 10%, signaling saturation in smaller merchants and a strategic focus on larger enterprise clients, where Shopify Plus MRR grew 17% and offers higher stickiness and margins.

The company’s asset-light model, achieved through the sale of its logistics business, has enabled leaner operating expenses, boosting operating profit and FCF despite a slight decline in gross margin. Valuation analysis using a forward P/S of 8.2x for FY26 and a DCF range of $145–$170 per share suggests Shopify is fairly valued at $156.59, balancing strong growth with credit and economic risks. Long-term upside depends on managing lending risks, platform governance, and competition from Amazon, positioning Shopify as a fintech-driven e-commerce platform with high potential but meaningful cyclicality.

Previously we covered a bullish thesis on Shopify Inc. (SHOP) by Investing Intel in May 2025, which highlighted revenue growth, improved operating income, and traction with larger merchants despite a GMV miss. The company's stock price has appreciated approximately 56.28% since our coverage. The thesis still stands as Shopify has completed its shift to an asset-light, merchant-solutions-driven model. Uncle Stock Notes shares a similar but emphasizes transaction-based revenue and associated credit risks.

Shopify Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 69 hedge fund portfolios held SHOP at the end of the second quarter which was 77 in the previous quarter. While we acknowledge the potential of SHOP as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.