Shopify SHOP shares are trading at a premium, as suggested by its Value Score of D. In terms of 12-month Price/Sales (P/S), SHOP is currently trading at 14.02X compared with the Zacks Computer & Technology sector’s 6.31X and the Zacks Internet-Services industry’s 6.11X.

The premium can be attributed to Shopify’s robust revenue growth and strong prospects.

Price/Sales Ratio (F12M)

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Shopify shares have appreciated 53.6% in the year-to-date period, outperforming the broader sector’s return of 31.8% and the industry’s return of 22.5%.

YTD Performance

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However, at such a premium valuation, the question that arises is whether it is still worthwhile for investors to buy SHOP shares at this level. Let’s dig deeper to find out.

SHOP’s Earnings Estimates Show Upward Trend

For the fourth quarter of 2024, Shopify expects revenues to grow at a mid-to-high twenties percentage rate on a year-over-year basis.

The Zacks Consensus Estimate for fourth-quarter 2024 revenues is pegged at $2.72 billion, indicating year-over-year growth of 27%.

The consensus mark for earnings is pegged at 43 cents per share, suggesting 26.5% growth year over year. The estimate has risen 10.3% in the past 30 days.

SHOP’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 24.50%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

An Innovative Portfolio Aids SHOP’s Prospects

Shopify is capitalizing on robust growth in its merchant base, driven by its merchant-friendly tools such as Shop Pay, Shopify Payments, Shopify Collective, Shopify Audiences, Shopify Capital and Shop Cash. These innovative offerings are enabling Shopify to attract new merchants, even amid challenging economic conditions.

SHOP’s ongoing efforts to streamline operations have successfully drawn a mix of smaller, emerging merchants and well-established large brands to its platform. By investing in cutting-edge solutions tailored for modern e-commerce, Shopify continues to strengthen its competitive edge. Its key product offerings include Shop Pay, Bill Pay, the Tax Platform, Collective and the Marketplace Connect app.

The integration of AI-powered features through Shopify Magic is transforming products and workflows, empowering merchants to expand their reach. Shopify Checkout enhances customer experience by providing secure and seamless checkout options, further cementing Shopify’s position as a leader in e-commerce innovation.

SHOP Benefits From a Rich Partner Base

SHOP continues to benefit through its partnerships with prominent names like TikTok, Instagram, Target TGT, Manhattan Associates, Oracle, COACH and Adyen. In the third quarter of 2024, Shopify became the first commerce integration partner for Roblox, opening new avenues for merchants to reach a younger and more engaged audience.

Shopify has also diversified its Payments product offerings through an expanded partnership with PayPal PYPL.

Alphabet GOOGL division YouTube has expanded its partnership with Shopify to bring more brands for its YouTube Shopping affiliate program. This collaboration provides Shopify merchants with a powerful new sales channel, leveraging YouTube creators to tap into its massive global audience.

Shopify’s point-of-sale (POS) solution continues to gain traction among major retailers such as Orlebar Brown, AKIRA, and Billy Reid. In Canada, women’s fashion retailer Laura transitioned the POS systems of its 130+ stores to Shopify, showcasing the scalability and reliability of SHOP’s solutions.

In the third quarter of 2024, Shopify also signed enterprise-level brands, including Reebok, Lions Gate Entertainment, Hanes and Vera Bradley. Iconic names like Victoria’s Secret, Jo-Ann Stores and Shoe Carnival are also slated to join the Shop Pay platform. This further solidifies Shopify’s reputation as a preferred choice for global retail giants.

What Should Investors Do with SHOP Stock?

Shopify’s expanding footprint and strategic partnerships with leading brands and platforms are fueling its near-term as well as long-term prospects. SHOP is solidifying its position as a dominant force in the e-commerce landscape.

The stock is trading above the 50-day and 200-day moving averages, indicating a bullish trend.

SHOP Shares Trading Above 50-Day & 200-Day SMA

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Shopify currently has a Zacks Rank #2 (Buy) and a Growth Score of B, a favorable combination that offers a strong investment opportunity, per the Zacks proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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