Shopify Is Well-Positioned Ahead Of A Creator Economy Surge

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Shopify ( SHOP , Financial ) appears to be undervalued based on my 15-year discounted cash flow model, offering the potential for an 11% CAGR in its enterprise value over the period. Therefore, the stock currently presents a compelling long-term investment opportunity. That said, despite the strong potential in a burgeoning SMB and creator economy, competitive risks from established tech players could pose challenges over time. Nonetheless, Shopify's strategic positioning and robust financial performance make it a favorable candidate for investors with a long-term horizon.

Shopify—the e-commerce platform designed to empower businesses of all sizes with tools for online, in-person, and global selling—is already well known. Its reputation is hinged on website building, product management, payment processing, analytics, marketing tools, and other initiatives to support companies reliant on e-commerce for successful operations. However, based on my analysis, its significant long-term opportunity lies in its distinct focus on facilitating infrastructure ideal for a burgeoning creator economy.

Based on Shopify's most recent Q3 2024 earnings report, its Merchant Solutions revenue (which is heavily driven by small merchants) accounted for 71.8% of its total revenue. Shopify Plus, the enterprise-level plan tailored for larger businesses, contributed 25% of monthly recurring revenue. Therefore, the company is already dominantly structured around supporting smaller businesses, which bodes very well for it as the creator economy continues to boom amid AI and automation trends replacing corporate jobs.

According to Goldman Sachs (GS), AI and automation may replace up to 300 million full-time jobs in the near future— some reports go as high as 800 million by 2030—with white-collar workers and manufacturing employees being particularly vulnerable. Therefore, it's reasonable to assess that the market for independent creators and small businesses is going to become more saturated, providing a revenue boost to Shopify as the leading provider of e-commerce solutions for small businesses.