Shares of Shopify (SHOP 0.55%) rose following the company's fourth-quarter results as it produced strong revenue growth. The stock of the e-commerce software platform is now up nearly 40% over the past year, as of this writing.

However, the company could feel some pressure from potential tariffs. Let's examine the company's most recent results and guidance to see if now is a good time to buy the stock.

Strong revenue growth

For the quarter, Shopify saw its revenue climb 31% to $2.81 billion. That handily beat analyst expectations for revenue of $2.73 billion, as compiled by LSEG. It was the company's seventh straight quarter of more than 25% revenue growth, excluding the logistics business that it previously jettisoned. Its high-margin subscription revenue increased 27% to $666 million, while merchant solution revenue surged 33% to $2.15 billion.

Gross profit dollars increased 27% to $1.35 billion. Its adjusted earnings per share (EPS) climbed 29% to $0.44, coming in just ahead of the $0.43 consensus.

Its gross merchandise volume (GMV), which is the total dollar value transacted through its platform, jumped 26% to $94.5 billion. It was its highest GMV growth rate since 2021. The company credited the performance to the solid same-store sales growth of its customer, an increase in the number of merchants on its platform, and strong international results.

The company saw strong GMV growth in a number of segments. Business-to-business (B2B) GMV was a highlight, surging 132% year over year in Q4. It was the sixth straight quarter of more than 100% B2B GMV growth. International GMV growth was also strong, up 33% in the quarter, led by a 37% increase in EMEA (Europe, Middle East, & Africa) GMV. Offline GMV, meanwhile, climbed 26%.

Increasing Shop Pay adoption also continues to be a growth driver. Shop Pay is the company's online checkout and payment processing solution. Shop Pay processed 38% of Shopify's GMV in 2024, up from 33% in 2023. In Q4, Shop Pay processed $27 billion in GMV, up 50% year over year.

While known initially for serving small and medium-sized businesses, Shopify also continues to make strong inroads with enterprise customers. The new enterprise customers the company added in the quarter include Reebok, Champion, Bark, Dooney & Burke, health and beauty company Goop, Hunter Douglas, and Warner Music Group. It also added soccer giant FC Barcelona to its platform, expanding the number of sports teams that use its services.

The company generated $611 million in free cash flow in the quarter, and $1.6 billion on the year.

Looking ahead, Shopify forecast that its first-quarter revenue would rise at a mid-twenties percentage rate. That was in line with the 24.4% revenue growth that analysts were looking for in Q1. Meanwhile, it's looking for gross profit dollars to grow at a low-twenties percentage rate.

For 2025, merchant solutions revenue is expected to grow at a quicker rate than subscription revenue, driven by Shop Pay adoption. Meanwhile, the earlier move to three-month trials from one month in certain markets will negatively affect subscription revenue in the first half. The company continues to plan to invest in key growth areas such as enterprise, international, and offline.

When asked about the effect of tariffs and de minimis shipping exemptions, the company said these issues affect real entrepreneurs. However, it said that merchants can now display and collect duties during checkout, and with Shop App, customers can shop from merchants from their home country using a filter.

Image source: Getty Images.

Is Shopify stock a buy?

Shopify continues to do a great job of adding new customers and helping them grow their businesses. It's made great strides moving up to enterprise customers, while making strong inroads into the B2B and offline spaces. It's also doing a good job of increasing Shop Pay adoption, which helps it grow along with its customers.

The company has also done a really nice job on the expense side, which is helping to lead to strong profitability and free cash flow growth. It's been able to reduce operating expenses as a percentage of revenue from 52% in Q4 2022 to 32% in Q4 2024. That's impressive expense management.

From a valuation perspective, the stock trades at a forward price-to-earnings (P/E) ratio of 81 based on the analyst consensus for 2025, and a forward price-to-sales (P/S) ratio of 14.3 times. However, given the gross margin difference between its merchant solutions and subscription solutions, I think it's better to value the company based on gross profits rather than on sales. While it is common to use a P/S multiple to value software-as-a-service (SaaS) stocks, they usually have very high total gross margins.

Assuming 20% gross profit growth, given that merchant solutions revenue is expected to grow faster than subscriptions in 2025, that would equate to around $5.4 billion in gross profits this year. Based on that, Shopify would trade at about 29 times 2025 gross profits. That's a bit of an elevated multiple.

The company is doing a nice job both growing and on the expense side, but I would not chase the stock here based on valuation. Meanwhile, it does face some risk with tariffs, and more so with any change to the de minimis shipping exemptions, which would hurt drop ship businesses on its platform.