Shopify Stock (NYSE:SHOP): Does High Growth Justify The High Valuation?

Note from the publisher: Shopify stock (NYSE:SHOP) has rallied by about 66% over the past year, reflecting the company's ongoing success in sustaining excellent growth metrics. The leading platform for building e-shops has been driving strong GMV, revenues, and free cash flow growth, boosting investor confidence in the stock. However, Shopify's extended rally reminds me of the ever-present concern surrounding the stock - its valuation.

Importantly, the premium attached to Shopify stock offers no margin of safety, thus I am neutral on the stock.

Let me start with the positive part of Shopify's investment case, which primarily includes the company managing to sustain excellent growth across the board. I find this to be a very impressive achievement, given both the tough comps from previous years and the added headwind caused by the Federal Reserve's efforts to cool down the economy.

Regarding the tough comps from previous years, note that Shopify posted revenue growth of 26.1% in FY2023,

Reference: See here

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Shopify stock ( NYSE:SHOP ) has rallied by about 66% over the past year , reflecting the company's ongoing success in sustaining excellent growth metrics. The leading platform for building e-shops has been driving strong GMV, revenues, and free cash flow growth, boosting investor confidence in the stock. Yet, Shopify's extended rally reminds me of the ever-present concern surrounding the stock — its valuation. Importantly, the premium attached to Shopify stock offers no margin of safety. Thus, I am neutral on the stock.