E-commerce platform Shopify Inc. (SHOP) has been a standout stock this year, rising almost 50% just this year. However, following last week’s Q3 results, shares experienced a pullback and now trade about 16% below their 52-week high. Some moderation at these levels is understandable, as investors reassess valuations after a strong run.
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However, Shopify continues to execute at a high level, and I view the recent decline as a healthy correction rather than a sign of weakness or a change in its strong, retail-driven growth narrative. Overall, I remain constructive on Shopify’s long-term prospects, even if its valuation still appears somewhat elevated.
What Spooked the Market
The market reacted cautiously to a few points of concern in Shopify’s Q3 report—and to be fair, the worries are understandable. First, monthly recurring revenue (MRR), Shopify’s core subscription-based income stream, delivered $193 million, modestly below expectations of around $195 million. Certainly not a tragedy, but it does indicate that subscription growth is lagging slightly behind the company’s broader revenue momentum.
Furthermore, stock-based compensation (SBC) remains a substantial expense. Management said Q3 SBC was $116 million and guided $130 million for Q4. It’s improving versus history, but it remains a sizable headwind when you translate “adjusted” results back to GAAP. (For context, trailing-twelve-month SBC sits around $1.1 billion.)
Lastly, on a GAAP basis, EPS missed Street consensus, and gross margin was a hair light, which is often all it takes to knock a momentum stock off balance for a few sessions. Operating income grew nicely, but it too was just shy of estimates, again, enough to bruise stock sentiment for a short while.
Shopify’s Growth Engine is Accelerating Again
But here’s the part that Wall Street seems to have quickly forgotten: Growth is accelerating. Revenue rose 32% YoY in Q3, up from 31% in Q2 and 26% in last year’s September quarter. GMV also jumped 32% to $92 billion. These are phenomenal numbers for a company that one could argue should have matured enough by now to post low-double-digit growth (or even below that), in a similar fashion to Amazon’s (AMZN) retail business.
And yet, you have several exciting catalysts in place. Payments and checkout are doing a lot of the heavy lifting, with Shop Pay processing $29 billion in GMV, up 67%, and Shopify Payments now covering about 65% of customers. Both factors meaningfully boosted take-rate and attachment tailwinds.
Internationally, Shopify continues to show impressive momentum, with Europe GMV up 49% year-over-year. The company’s enterprise client base is also expanding, adding well-known names such as Estée Lauder, e.l.f., FanDuel, and Welch’s, along with other major omnichannel retailers adopting its POS solutions.
Offline GMV climbed 31%, while B2B GMV nearly doubled. Profitability remained solid as well—despite some minor concerns on the income statement, Shopify delivered an 18% free cash flow margin and exceeded revenue expectations for the third quarter.
Why The Next Leg Still Looks Strong
Looking ahead, I believe Shopify’s outlook remains highly compelling. Management has guided for mid- to high-20s revenue growth in Q4—a cautious projection, considering the tough year-over-year comparison and some foreign exchange headwinds.
Under the hood, the same forces that drove Q3 are still in place, including stronger payment penetration, a more capable checkout (Checkout Kit, Universal Cart), and a rising tide from “agentic commerce” via partnerships (OpenAI, Microsoft (MSFT), Perplexity) that are funneling more intent directly into merchant stores. Adding holiday seasonality and a deeper enterprise/international mix, I project that growth will likely remain in the low 30s.
Now, valuation remains the elephant in the room. Yes, it’s still expensive. The stock trades at a forward P/S and P/E of about 15 and 91, respectively. I don’t love paying such a premium either, but if revenue holds near ~30% and margins expand (due to a better payments mix, software attach, and operating leverage), those multiples will compress quickly.
I’ve previously raised concerns about Shopify’s valuation. However, at this stage, I wouldn’t challenge the premium if the company’s growth continues to reaccelerate and prove sustainable. Shopify is demonstrating the right kind of momentum—driven by deeper product adoption (Shop Pay), broader ecosystem expansion (B2B and Offline), and strong international growth (particularly in Europe)—rather than by one-time pricing effects.
Is SHOP a Good Stock to Buy Now?
On Wall Street, SHOP stock features a Moderate Buy consensus rating, based on 17 Buy and nine Hold ratings. Not a single analyst rates SHOP stock a Sell. Moreover, Shopify’s average stock price target of $179.36 implies almost 13% upside potential over the next 12 months.
Shopify’s Dip is More a Gift Than a Warning
Despite valuation concerns and a softer MRR print, Shopify’s underlying momentum remains undeniable. Growth is accelerating with quarterly revenues climbing 32% year-over-year in Q3. Key drivers like payment penetration, enterprise adoption, and international expansion are firing on all cylinders.
With holiday seasonality and continued product-led adoption sustaining roughly 30% growth, I believe Shopify’s rich multiples can ease naturally through operating leverage rather than multiple contraction. In my view, this pullback represents an opportunity, not a warning sign—and I remain bullish on Shopify’s long-term trajectory.