I’m not sure how closely anyone here follows Shopify these days. Ever since it stopped being a board favorite here after it’s big run from 2017 to 2019 (which in retrospect pales in comparison to their subsequent runs!), I haven’t paid too much attention to them, as an investment, in recent years.
But in recent weeks, after making purchases during about a half dozen black Friday / cyber Monday sales online and seeing that almost all of them used Shop to handle checkout/payment (which is a really simple/easy convenient customer friendly experience in my opinion), I felt like I should take a closer look at Shopify again before they report results for the holiday season this year.
I’ve taken three small starter positions this week in my otherwise very concentrated portfolio 1) Alphabet (GOOG) 2) Trade Desk (TTD) which I shouldn’t really call a “starter” position since it was my largest holding for a good chunk of the past five years, but I finally sold the last of my 2019 TTD shares in October, and with the stock price down in the $30’s now, I took a small bite back in and 3) now Shopify (SHOP)
My Personal Shopify Investing History
Like many that were on this board at the time, I started buying Shopify in early 2017 when the stock price was about $6 (split adjusted, it was trading in the $60’s at the time) and I ultimately sold 2+ years later toward the end of 2019 with my largest sales around $35 ($350 at the time before the split).
More than a five-bagger in two and a half years, not too shabby.
But when I look at the chart since then….WOW….the two big subsequent runs makes what we all considered a pretty incredible run from 2017-2019 look like a mediocre blip on the radar!
If I had held on another two years and timed my sale perfectly at the 2021 peak, it would have been a more than 20-bagger in less than five years. Interesting to look back at, but market timing has hardly been one of my strengths.
So What Now?
Today, SHOP is a $200 billion+ company already
According to this list, it’s the #79 largest public company in the world right now, by market cap bigger than Citgroup, Pepsico, Walt Disney, Intel and lots of other household names
https://companiesmarketcap.com/
A five bagger from here would require them to become a $1 trillion company.
The past two full years, Shopify has grown revenue +26% (in 2023 and 2024). During the peak seasonal holiday shopping fourth quarter, revenue growth accelerated last year, from +24% (Q4 2023) to +31% (Q4 2024)
In terms of profitability, in 2023, Shopify took a $1.3 billion impairment loss on its logistics business, resulting in annual bottom line results of -$1.4 billion annual operating loss and -$1.2 billion net loss. So excluding the impairment charge, they were essentially breakeven in 2023.
In 2024 last year, they grew their gross profit almost a billion dollars from $3.51 B in ’23 to $4.47 B in ’24, while reducing their operating expenses (even excluding the ’23 impairment charge) from $3.6 B in 2023 to $3.3 B in 2024, growing their operating income (again net of the ’23 impairment) from a small loss in 2023 to almost $1.1 billion in 2024.
OK, so that’s still a $1 billion profit (last year) on a $100 billion market cap company (today) growing at 26% in 2024. Still pretty pricey.
And This Year So Far?
For the nine months YTD of 2025 through Q3, Shopify grew revenue +30% from $6.1 billion to $7.9 billion. In the same nine month period of 2024, they grew only +23% from $4.9B to $6.1B. For the most recent quarter, in Q3’25 revenue growth was even stronger at almost $32%.
Pretty solid acceleration which has helped drive the stock price up more than +50% so far this year.
Operating Income has grown +37% from $837 million for 9mos 2025 from $610 million in ’24. I haven’t dug into the details yet, but it looks like they’ve recorded about -$400m of unrealized losses on investments so far in 2025, which has caused the net income bottom line to decrease from $726m (9mos ’24) to $488m (9mos ’25)
Management guidance for the fourth quarter of 2025:
-Revenue to grow at mid-to-high twenties percentage rate YOY
-Gross profit dollars to grow at a low-to-mid twenties percentage rate YOY
-Operating expense as a percentage of revenue to be 30% to 31%
-Stock based comp $130 million
-Free cash flow margin to be slightly above Q3 2025
Assuming there is some sandbagging built into their revenue guidance (I haven’t gone back to look at recent results to see how sandbagger-ish they have been lately) and they come in, in the low 30%’s revenue growth, that would be pretty solid continued acceleration especially considering the size and scale that Shopify has grown into
I’m less crazy about seeing the range of gross profit dollars growing approx. 5% slower than the revenue growth rate guidance, so that gives me some pause unless there has been some big nonrecurring or one off operating expenses in 2025. Considering that their opex (net of impairment) decreased from ’23 to ’24 last year, I might give them the benefit of the doubt regarding their spending and cost discipline.
So………?
All told, it looks like the solid company that we know SHOP to be, moving in the right direction, and accelerating in recent years. But the price they’re selling for today, to me, makes this far from a no-brainer.
From what I’ve heard, the holiday shopping season is off to a very strong start this year, so that certainly bodes well for Shopify in the short term.
I don’t think I’ve convinced myself to take a much bigger stake going into the Q4 results (which should come out the second week of February) but I’ll probably hold onto the small tryout position I bought this week until we see those results, barring any other extraordinary looking opportunities appearing (or a big run up ahead of earnings) that make me want to sell and reallocate the funds.
Is anyone else still following Shopify? Anything I’m missing or should also be considering?
-mekong
