Should Investors Still be Hyped for Shopify Stock?

Core Insights - Shopify's stock has increased over 400% in the last three years, outperforming broader indexes and Amazon's 175% growth [1] - The company announced a partnership with OpenAI to integrate commerce into ChatGPT, which has contributed to its momentum [2] Financial Performance - Shopify's Q3 Gross Merchandise Volume (GMV) rose 22% year over year to $56.2 billion, with subscription revenue increasing 25% to $142 million [4] - Total revenue for Q3 expanded 32% to $2.84 billion, surpassing estimates of $2.75 billion [5] - Q3 earnings per share (EPS) were $0.34, slightly down from $0.36 a year ago but aligned with market expectations [5] Efficiency Metrics - Free cash flow (FCF) surged 78% in Q3 to $507 million, marking the ninth consecutive quarter of double-digit FCF margins at 18% [6] - Shopify's FCF conversion rate exceeds 80%, indicating strong efficiency in turning operating profits into free cash flow [7] - Return on Investment Capital (ROIC) typically ranges from 14% to 19%, suggesting robust capital investment returns [7] Future Outlook - Shopify anticipates Q4 revenue growth in the mid to high 20% range, maintaining full-year FCF margins in double digits [9] - Projections indicate over 20% top-line growth for fiscal years 2025 and 2026, with annual EPS expected to rise 11% in FY25 and 21% in FY26 to $1.76 [10] Valuation and Market Position - Shopify's stock trades at a forward earnings premium of 110X, with efficiency metrics suggesting potential for growth into this valuation [12] - The company holds a Zacks Rank 1 (Strong Buy), supported by a positive EPS revision trend [13]