Does Shopify’s Soaring Price Still Make Sense Amid New OpenAI Shopping News?

If you have been watching Shopify, you are not alone. The company’s explosive long-term gains often spark the classic debate: hold, sell, or jump in now? Whether you are a long-term bull or a cautious skeptic, Shopify’s recent price action gives everyone something to talk about. In the last week, shares slipped by 1.9%, but over the past month, they have managed to eke out a 1.4% gain. Looking longer-term, the year-to-date move sits at an impressive 33.3%, and the stock has soared a whopping 94.9% in just the past year.

Zoom out even further and Shopify has returned over 335% in the past three years, with a still-massive 54.5% gain across five years. Clearly, Shopify is no stranger to big moves. Investors are now asking whether the stock is priced too high relative to what it can deliver, especially as growth narratives shift. Recent headlines have focused more on the broader tech landscape, such as OpenAI’s ambitions to reshape commerce, rather than anything fundamentally shifting for Shopify itself. As a result, the attention naturally turns to the question of valuation.

Out of six major valuation checks, Shopify is considered undervalued in none of them. That means its valuation score sits at 0, which can be a red flag for value-focused investors, but it does not tell the whole story. Let’s look at how the usual valuation approaches stack up for Shopify and, even better, explore a smarter way to think about what the company is really worth.

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 forecasts Shopify’s future cash flows and discounts them back to today’s dollars to estimate what the company is intrinsically worth. This approach is rooted in projecting how much cash the business can generate each year and then comparing that sum to the stock’s current trading price.

Shopify’s latest reported Free Cash Flow stands at approximately $1.8 billion. Analyst estimates, combined with further projections, suggest that annual free cash flows could more than quadruple to over $9.3 billion by 2035. This reflects aggressive expectations for Shopify’s ongoing business growth. Much of the longer-term forecasts are extrapolated rather than strictly analyst-driven.

Based on these projections, the DCF model calculates Shopify’s intrinsic value at $93.88 per share. However, looking at the market, Shopify’s share price currently trades at a premium. The DCF valuation implies the stock is about 52.7% overvalued at current levels. That is a notable disconnect for investors weighing the stock’s long-term upside versus its rich current price tag.

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 52.7%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Shopify Price vs Earnings

For profitable companies like Shopify, the Price-to-Earnings (PE) ratio is often the most straightforward way to understand what the market is willing to pay for each dollar the business earns. The PE ratio works well here because Shopify has demonstrated sustained profitability, making earnings-based comparisons both meaningful and reliable.

Growth expectations and risk play a big part in what counts as a “normal” or “fair” PE for any given stock. Higher anticipated profit growth or a lower risk profile can justify peers and the market assigning a higher multiple. Conversely, stagnant growth or heightened risks tend to pull that figure down. Looking at Shopify today, the company trades at 79.5x earnings, which is far above the IT industry average of 29.0x and even higher than the peer group’s average of 52.6x. These numbers highlight that Shopify’s market valuation is riding a much steeper curve compared to many of its closest comparables.

This is where Simply Wall St’s proprietary Fair Ratio becomes essential. Unlike traditional comparisons, the Fair Ratio takes into account Shopify’s specific earnings growth prospects, industry dynamics, profit margin, company size, and overall risks. This approach provides a tailored benchmark. For Shopify, the Fair Ratio is 42.7x, significantly lower than the company’s current multiple. This gap suggests that, even after factoring in Shopify’s unique positives, the stock price is running ahead of what its underlying fundamentals warrant.

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 that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a tool that allows you to craft the story you believe about a company, connecting your unique perspective on future growth, earnings, and margins to a financial forecast and an estimated fair value. Narratives help make sense of the numbers by rooting them in real-world business trends, risks, and opportunities, letting you clearly see how your assumptions stack up against other investors.

On Simply Wall St's Community page, millions of investors use Narratives to summarize their outlooks, map out future performance, and make buy or sell decisions by directly comparing their calculated Fair Value to the current market Price. The real power of Narratives is that they update automatically as new events or earnings change the outlook, ensuring your view always reflects the latest information.

For example, looking at Shopify, one Narrative expects rapid international expansion and AI integration will open up new global markets and projects a fair value of $200 per share. Another more cautious Narrative, focused on risks like regulatory hurdles and rising competition, estimates fair value closer to $114. In seconds, you can see exactly how different stories and the numbers behind them lead to widely different investment conclusions.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com