Shopify: Stock of the Week

An update on Canada’s top-performing stock of 2023.

Andrew Willis 22 April, 2024 | 4:49AM
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Key Takeaways for Shopify Stock:

  • Shopify stock (SHOP) has climbed back into our fair value estimate range, as investors eye an end to interest rate hikes that have hit tech stocks.
  • Investors may be recognizing Shopify’s progress on both customer and product diversification, which could help reduce the impact of a potential recession.
  • Shopify’s diverse client base should be viewed positively but it complicates our moat analysis. A growing majority of revenue also now comes from merchant solution add-ons such as shipping and financing.


Andrew Willis: It’s nice to see that, unlike Canada’s most popular stock of 2023, which took a little tumble a week after our coverage in December, our top-performing Canadian stock last year has held its own.

Shopify stock has recovered to a trading range we consider fairly valued after Canadian interest rates chipped away at tech stock valuations for a while… and Shopify’s rough 2022 earnings. But with market sentiment suggesting an end to interest rate hikes, and Canadian recession talk quieted down, it may not be a surprise that this top Canadian tech stock is rebounding – especially when it has been diversifying.

Gone are the days of an e-commerce business concentrated in tech startups with high failure rates. Today, Shopify’s client base is diversified with larger merchants and an enterprise segment with a 90% retention rate. A recession is still a possibility, but Shopify's evolving client base has yet to be put to the test.

Continued Shift to Merchant Solutions Expected at Shopify

Senior equity analyst Dan Romanoff forecasts a continued shift to merchant solutions from subscription plans and forecasts a 19% annual compound growth rate for total revenue. Which brings us to the diversification that’s happened within Shopify’s revenue streams. Romanoff sees revenue being driven by new merchants joining the platform but also growth in services such as payment processing, shipping and even financing programs.

So while there may be a high churn rate for small business customers at Shopify – especially in a recession – this should be countered by more revenue opportunities from businesses that do succeed and become Shopify Plus enterprise customers. Now apply that model to the company’s international expansion underway and we may find out why people stopped selling Shopify.  

For Morningstar, I’m Andrew Willis.



bulls Shopify Bulls Say

  • Shopify’s growth has been strong and is expected to remain so, with robust new merchant adds, increasing GMV, and high attach rates.
  • We believe Shopify is attractive for SMBs because it is simple to use and has a wide variety of built-in features that make it a turnkey solution.
  • The company has many experts to help SMBs with website design, photography, and other elements of the process and benefits from a large referral and developer ecosystem.

bears Shopify Bears Say

  • Shopify has traded at lofty valuations at times, and while it might continue to generate strong growth, the company may still fail to live up to optimistic assumptions embedded in the share price.
  • Shopify is overexposed to the economic cycle, with the high failure rate for core SMB customers exacerbated by the fact that retail volume would likely decline in a downturn. Additionally, management’s strategy is to avoid going direct to consumers.
  • The buildout of the Shopify Fulfillment Network will require substantial investment in both financial terms and management resources.



The author or authors do not own shares in any securities mentioned in this article.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Shopify Inc Registered Shs -A- Subord Vtg79.63 CAD1.14Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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