We recently compiled a list of the 10 Hot Growth Stocks to Invest in According to Analysts. In this article, we are going to take a look at where Shopify Inc. (NYSE:SHOP) stands against the other hot growth stocks.
The big rally in the broader stock market might have ceased, but there are a lot of things to focus on under the surface, says Morningstar. Notably, technology stocks, which were the leading contributors to the big bull market in 2023 and 2024, have seen strong declines in 2025. Elsewhere, other sectors including financial services, basic materials, and healthcare continue to see new investor interest.
Morningstar, while highlighting the comment from Michael Arone (chief investment strategist at State Street Global Advisors), mentioned that non-US markets including China, the UK, and Germany have seen strong rallies. Notably, the market strategists continue to see a subtle transition in leadership. The broader markets have been struggling to find focus due to the uncertainties related to the future. The US Fed rate cuts are not guaranteed this year, while inflation remains sticky. Also, the potential impact of Trump’s economic policy proposals is unknown yet.
Is a Market Rotation on the Horizon?
To provide a brief perspective, when a rotation occurs, the market investors tend to shift their focus from stocks that were critical to a strong trend to other parts of the broader equity market that have not seen much movement. Morningstar believes that there is plenty of evidence that a rotation is underway. Technology stocks, which have seen an increase of over 36% in 2024, are down in 2025. The NASDAQ-100 Technology Sector has seen a decline of ~0.74% on a YTD basis.
The basic materials sector was the worst performing sector in 2024. However, so far in 2025, related stocks have managed to deliver decent gains. Dow Jones U.S. Basic Materials Index increased by over ~6% on the YTD basis. Also, healthcare stocks have grabbed investors’ attention after they returned ~2.7% in 2024, says Morningstar. Dow Jones U.S. Health Care Index returned over 7% on a YTD basis. As per Dan Kemp, Morningstar chief research and investment officer, there seems to be a rotation in terms of valuations.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
UBS Remains Optimistic About S&P 500 in 2025 Despite Challenges
UBS has reiterated the importance of portfolio diversification and hedging in a bid to navigate the market volatility moving forward. Investors are required to consider capital preservation strategies so that they can limit the portfolio losses. Investors looking to build up long-term AI exposure can use structured strategies or “buy the dip” strategy in certain quality AI stocks.
UBS expects 2025 capex from the Big 4 US tech firms to increase by 35% to reach US$302 billion, with the firm seeing strong demand for frontier models. Due to the AI adoption trends fueling monetization, it projects mid-teens returns for global AI stocks this year.
Our Methodology
To list the 10 Hot Growth Stocks to Invest in According to Analysts, we used a screener to shortlist stocks that have gained at least 30% over the past 6 months and that analysts see at least 20% upside to over the next 12 months. Next, we ranked the stocks in ascending order of their average upside potential, as of March 5. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An enthusiastic customer completing a purchase and receiving an order confirmation via one of the companies online sales channels.
Shopify Inc. (NYSE:SHOP)
% Gain Over 6-Month Period: ~58.9%
Average Upside Potential: ~26%
Number of Hedge Fund Holders: 64
Shopify Inc. (NYSE:SHOP) is a commerce technology company which is engaged in providing tools to start, scale, market, and run a business of various sizes. The company’s expansion into enterprise and international markets offers a significant growth opportunity. The enterprise segment provides the potential for larger deal sizes and stable recurring revenue. With Shopify Inc. (NYSE:SHOP) continuing to sign new enterprise customers and expanding its offerings for larger businesses, it can see strong growth in GMV and revenue. Furthermore, international expansion, mainly in regions such as Europe, can support the company to tap into new markets and diversify revenue streams.
Shopify Inc. (NYSE:SHOP) expects the strong merchant momentum from Q4 2024 to carry over into Q1 2025, recognizing that Q1 is consistently the company’s lowest GMV quarter seasonally. For Q1 2025, the company expects revenue to grow at a mid-twenties percentage rate on a YoY basis and gross profit dollars to increase at a low-twenties percentage rate YoY. Benchmark analysts maintained a “Buy” rating on the company’s stock, reiterating a price objective of $150. The analysts highlighted the healthy cohort momentum, which indicates the performance and growth patterns in different groups of customers who started using Shopify Inc. (NYSE:SHOP)’s services at various times.
This momentum reflects that the company’s existing users continue to grow their businesses on the platform, resulting in the overall growth. Polen Capital, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Shopify Inc. (NYSE:SHOP), a new addition to the portfolio in the second quarter, represented the top contributor to relative performance in the fourth quarter. The company is firing on all cylinders and the stock responded, up 21% on the back of its latest set of strong results. Gross Merchandise Value (GMV) growth accelerated despite a tough YoY comparison, +24%. The company is experiencing strength across its Shopify Plus enterprise business, offline point of sale (“POS”) segment, and international and “B2B” segments. With several powerful tailwinds at their back (eCommerce, mobile commerce, social media, digital payments, seamless omnichannel, DTC, cloud software digitization) and a highly scalable business model, we think Shopify is exceptionally well-positioned for where the world is heading, with growth likely stronger for longer than investors expect.”
Overall SHOP ranks 10th on our list of the hot growth stocks to invest in according to analysts. While we acknowledge the potential of SHOP as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued 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.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.