Should You Buy, Sell, or Hold Shopify Stock at This Price?

Core Viewpoint - Shopify (SHOP) is currently overvalued with a Value Score of F, trading at a Price/Sales ratio of 11.10X compared to the sector average of 5.58X [1] Group 1: Stock Performance - SHOP shares have declined 7.2% year-to-date, while the broader Zacks Computer & Technology sector has seen a decline of 11.3%, and the Zacks Internet - Services industry has increased by 13.3% [3] - The decline in share price is attributed to macroeconomic challenges, including tariffs imposed by the U.S. government, raising the risk of a trade war [7] Group 2: Growth Drivers - Shopify's growth is supported by an expanding merchant base and the adoption of merchant-friendly tools such as Shop Pay, which processed $27 billion in gross merchandise value in Q4 2024, a 50% increase year-over-year [9] - The company has seen a 132% growth in B2B Gross Merchandise Value in Q4 2024, indicating strong performance in the B2B market [10] - Shopify's partnerships with major companies like TikTok, Instagram, and PayPal are enhancing its growth prospects and diversifying its payment solutions [12][13] Group 3: Financial Outlook - The Zacks Consensus Estimate for SHOP's 2025 earnings is $1.45 per share, indicating an 11.54% year-over-year growth, while revenues are estimated at $10.77 billion, reflecting a 21.26% growth [15] - Shopify has consistently beaten earnings estimates in the past four quarters, with an average surprise of 22.08% [16] Group 4: Competitive Landscape - Shopify faces significant competition from e-commerce giants like Alibaba and Amazon, with the latter's "Buy with Prime" service intensifying the competitive environment [16][17] - The company is shifting to a three-month paid trial in certain markets to improve merchant retention, which may negatively impact Monthly Recurring Revenue (MRR) growth in the near term [19]