Europe And Asia Will Drive Global Online Commerce Expansion

Key Takeaways

• Rapid international and enterprise expansion, fueled by innovative platform features, positions Shopify for outsized revenue growth and resilience across diverse markets and verticals.
  
• Leadership in global digital payments and AI-driven commerce tools lowers barriers for entrepreneurs, supporting sustained earnings growth and increased market share.
  
• Rising regulatory, competitive, and cost pressures threaten Shopify's margins, international growth, and merchant retention, challenging its ability to sustain long-term profitability and differentiation.

Catalysts

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.

• While analyst consensus expects international growth to be a key driver, current trends indicate Shopify could dramatically outperform, with recent international GMV growth of 42 percent year over year led by Europe and accelerating momentum in Asia Pacific, suggesting a far steeper and longer runway for topline revenue expansion than widely modeled.
  
• Analysts broadly agree that Shopify benefits from the shift to online and mobile commerce, but core platform innovation-particularly in AI-powered commerce discovery, agentic shopping, and native integrations with emerging digital and social channels-could enable Shopify to capture disproportionate share of new online retail, accelerating GMV growth well above sector averages and consensus forecasts.
  
• Shopify is rapidly onboarding global enterprise and B2B clients across unexpected verticals such as mining, industrial, and automotive, expanding its total addressable market far beyond traditional retail and DTC, with potential to materially increase average revenue per user and resilience of earnings.
  
• The universalization of Shopify's transactional infrastructure-including payments, cross-border multi-entity support, and stablecoin options-uniquely positions the company to dominate the enabling layer for global digital payments, supporting both sustained net margin expansion and higher recurring earnings as more global economic activity moves online.
  
• By lowering the barrier to entrepreneurship with instant AI-powered store creation, advanced performance marketing automation, and risk-free advertising solutions, Shopify can catalyze a new wave of small business formation worldwide, unlocking significant upside in both subscription and merchant solutions revenues over the long term.

Shopify Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Shopify compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Shopify's revenue will grow by 25.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 23.4% today to 17.4% in 3 years time.
• The bullish analysts expect earnings to reach $3.5 billion (and earnings per share of $2.64) by about September 2028, up from $2.3 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 96.9x on those 2028 earnings, up from 79.5x today. This future PE is greater than the current PE for the US IT industry at 29.0x.
• Analysts expect the number of shares outstanding to grow by 0.59% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.3%, as per the Simply Wall St company report.

Shopify Future Earnings Per Share Growth

Risks

• Intensifying regulatory scrutiny on data privacy and cross-border e-commerce, as well as the proliferation of digital taxes and VAT/GST enforcement globally, could increase Shopify's compliance costs and constrain its international growth strategy, putting long-term pressure on its revenue and earnings.
  
• The rise of anti-monopoly actions favoring open-source or decentralized e-commerce solutions may reduce Shopify's pricing power and ability to win or retain large merchants, ultimately risking both market share and gross margins.
  
• Ongoing increases in digital advertising costs and competition for merchant acquisition-highlighted by the company's need for higher planned marketing spend-may lead to sustained pressure on Shopify's operating and net margins as growth requires greater investment.
  
• Persistent churn among small and medium-sized merchants, particularly during economic slowdowns or if product-market fit lags in new segments, could undermine revenue growth and earnings stability, given Shopify's reliance on SME customers for its subscription and transaction streams.
  
• Shopify's dependence on external payment and logistics partners, along with competitive threats from large incumbents and rapidly evolving AI-powered website builders, may compress gross margins and erode product differentiation, posing risk to sustainable long-term profitability.

Valuation

• The assumed bullish price target for Shopify is $200.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Shopify's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $200.0, and the most bearish reporting a price target of just $114.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $19.9 billion, earnings will come to $3.5 billion, and it would be trading on a PE ratio of 96.9x, assuming you use a discount rate of 8.3%.
• Given the current share price of $143.44, the bullish analyst price target of $200.0 is 28.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.