Does Shopify’s Soaring 53% Rally Reflect AI Shopping Hype or Solid Fundamentals?

So, you are wondering whether it is time to buy, sell, or simply hang tight with Shopify stock? You are definitely not alone. Shopify has been one of the most talked-about names in e-commerce for years, and with good reason. Over the past year alone, Shopify’s share price has skyrocketed by 103.4%, outpacing the broader market by a significant margin. Year-to-date, the stock is up 53.0%, and just in the past 30 days it has gained another 12.0%. For anyone who already owns shares or is considering jumping in, these numbers are both exciting and just a little dizzying.

What is driving this wave of renewed interest? Part of it may be Shopify's ongoing reputation as a leader in online retail, but broader tech optimism and growing chatter about AI-driven commerce tools are also in play. For example, news like OpenAI’s push into shopping via ChatGPT highlights just how much digital commerce is evolving, sparking speculation and investor excitement around platforms such as Shopify that stand to benefit from these trends. That said, a sharp price rally can sometimes lead to stretched valuations, so it is worth pausing to ask whether these shares are getting too expensive.

When we run Shopify through six different valuation checks, ranging from price-to-earnings to discounted cash flow, the score comes out at 0 out of 6, signaling the stock looks overvalued by traditional measures. But before you jump to conclusions, let’s break down what each method actually tells us and explore whether there is a smarter way to assess Shopify’s true value at this point in its growth journey.

Shopify scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Shopify Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today's dollars. This method is widely used to assess a stock's true worth based on its long-term earning potential rather than short-term market moves.

For Shopify, the latest reported Free Cash Flow (FCF) stands at approximately $1.8 Billion. Analysts provide projections for the next five years, forecasting continued growth in Shopify’s free cash generation. After 2029, Simply Wall St extrapolates further and estimates that FCF could reach $9.4 Billion by 2035. All figures are in US dollars, aligning with Shopify’s reporting and share price currency.

When these cash flows are discounted to the present using the 2 Stage Free Cash Flow to Equity model, the DCF produces an estimated intrinsic fair value of $94.08 per share. Compared against Shopify’s current trading price, this suggests the stock is about 74.8% overvalued by this approach.

In summary, while Shopify’s long-term growth story remains impressive, the DCF model signals that the current share price is running well ahead of fundamentals.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Shopify.

Our Discounted Cash Flow (DCF) analysis suggests Shopify may be overvalued by 74.8%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Shopify Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular way to value profitable companies like Shopify, as it gives investors a sense of how much they are paying for each dollar of current earnings. When a company is generating profits, the PE ratio provides a quick benchmark for whether the stock might be expensive or cheap relative to expected growth and market sentiment.

Growth expectations and risk profile play a big role in what PE ratio is considered “normal.” High-growth tech stocks often command higher multiples than mature companies, but investors should be careful if the multiple stretches too far beyond earnings or sector trends.

Shopify currently trades at a PE ratio of 91.17x. That is more than double the peer average of 44.99x and nearly three times the IT industry average of 32.87x. On the surface, this makes Shopify look significantly more expensive than its competitors.

This is where Simply Wall St’s proprietary Fair Ratio comes in. The Fair Ratio is an adjusted benchmark that considers Shopify’s growth potential, industry, profit margins, company size, and risk profile, offering a more tailored comparison than just using industry or peer averages. Shopify’s Fair Ratio stands at 43.38x, reflecting what a reasonable PE might be given its unique profile and prospects.

Comparing Shopify’s actual PE of 91.17x to its Fair Ratio of 43.38x, the stock appears considerably overvalued based on this approach.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Shopify Narrative

Earlier we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple, powerful tool that helps you apply your own story and expectations to a company’s numbers by defining assumptions for fair value, future revenue, earnings, and margins, instead of relying solely on one-size-fits-all metrics.

Narratives bring your investment thesis to life by linking Shopify’s business story, such as rapid international growth, AI innovation, or financial ecosystem expansion, to concrete financial forecasts and ultimately a fair value estimate. This approach is accessible to all investors through the Community page on Simply Wall St, where millions already use Narratives to check and share their perspectives in real time.

With Narratives, you can decide when to buy, hold, or sell by comparing your calculated Fair Value (using your story) to the current market price. This helps make sense of volatile moves and big valuation swings. Narratives update automatically whenever new information or earnings are released, helping your investment view stay relevant and responsive.

For example, some investors currently believe Shopify is worth as much as $200 per share thanks to global expansion and rapid AI integration, while others see fair value closer to $114 due to rising competition and slowing margins. This highlights how flexible, evidence-driven Narratives help each investor stay in control of their own decisions.

Do you think there's more to the story for Shopify? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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