We came across a bullish thesis on Shopify Inc. (SHOP) on Substack by Compounding Your Wealth. In this article, we will summarize the bulls’ thesis on SHOP. Shopify Inc. (SHOP)’s share was trading at $82.29 as of April 3rd. SHOP’s trailing and forward P/E were 53.04 and 54.35 respectively according to Yahoo Finance.
Shopify, founded in 2006 in Ottawa, has grown into one of the world’s most influential e-commerce infrastructure companies, now powering over 4.6 million active websites. What began as a platform for small merchants to launch online stores has evolved into a sophisticated ecosystem that spans point-of-sale systems, merchant financing, and fulfillment services, serving businesses from individual entrepreneurs to major global brands like Reebok and Barnes & Noble. With a 29% share of the U.S. e-commerce platform market and 10.32% globally, Shopify has cemented itself as a category leader, yet it has still penetrated less than 1% of its $849 billion total addressable market. This leaves substantial upside across online and offline retail, B2B commerce, and high-margin merchant services. Its scalable model, increasingly global presence, and full-stack capabilities have positioned Shopify as an indispensable partner for merchants seeking to build, grow, and manage their business in a digitally integrated world.
Shopify’s moat is reinforced by its platform depth and sticky customer base. Its scale enables aggressive investment in product development, bolstering its lead in functionality and tooling. Shopify’s 8,000+ app ecosystem, coupled with a fast-scaling B2B segment—registering six consecutive quarters of 100%+ GMV growth—creates a network effect that further locks in merchants. High switching costs, especially for larger merchants reliant on Shopify’s payment, inventory, and logistics integrations, drive customer retention north of 90%. Shopify Payments now accounts for 64% of GMV, while Shop Pay continues to outperform competitors on conversion. These embedded tools make Shopify increasingly difficult to displace, even as competition intensifies.
The company’s global brand strength has fueled international expansion, now comprising 30% of revenue and growing at a 30%+ clip for two consecutive years. Shopify has also made strides in offline retail with its Point-of-Sale (POS) system, enabling merchants to operate seamlessly across digital and physical channels. Its B2B commerce capabilities are gaining adoption, offering features like custom pricing, discount structures, and flexible payments—critical for scaling wholesale businesses. As merchants demand more from commerce platforms, Shopify is positioned to capture a larger share of merchant spending across every stage of the commerce journey.
Financially, Shopify continues to outperform. Q4 revenue was up 31% year-over-year, led by 33% growth in its Merchant Solutions segment, which now drives 76% of total revenue. Gross Payments Volume surged 35% to $61 billion, reinforcing the company’s increasing role in transaction processing. Subscription Solutions, which delivers high-margin recurring revenue, grew 27% year-over-year and now accounts for 24% of total revenue. Although the segment’s gross margin dipped slightly to 79.9% due to mix and temporary headwinds from a shift to three-month free trials, this strategic change is expected to improve merchant stickiness and long-term GMV capture. Monthly Recurring Revenue rose 24% in Q4, with broad-based growth across standard, Plus, and offline tiers, signaling the durability of its customer base and revenue streams.
Despite its premium valuation—11.5x forward EV/Sales and a forward P/E of 67.6—Shopify’s financial strength and growth outlook justify its multiple. Analysts project revenue growth of 25.5% in 2025 and 20.9% in 2026, supported by margin expansion and a high-attach ecosystem. With forecasted EPS growth of 26% in 2026 and 40% in 2027, Shopify’s PEG ratios fall to 2.5 and 1.3 respectively, with the 2027 level approaching Peter Lynch’s benchmark of 1.0. This implies that current pricing offers reasonable to attractive value for long-term investors, particularly as the company continues to pivot away from lower-margin logistics toward high-margin recurring revenue streams.
Operational performance remains robust, with strong GMV and GPV trends, increasing cross-sell success, and encouraging attach rate metrics that validate Shopify’s platform strategy. The company maintains a clean balance sheet and is actively monitoring stock-based compensation to limit shareholder dilution. While a modest dip in Q1 revenue is expected from Q4 levels, it remains above Q3, highlighting continued resilience. In totality, Shopify presents one of the strongest compounders in tech-enabled commerce, driven by best-in-class execution, high-margin growth, and unmatched platform scalability. Its combination of market leadership, strategic clarity, and financial momentum offers an excellent long-term investment profile with meaningful upside potential.
Shopify Inc. (SHOP) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 64 hedge fund portfolios held SHOP at the end of the fourth quarter which was 56 in the previous quarter. While we acknowledge the risk and potential of SHOP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SHOP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.