1 Reason Shopify Stock Is Approaching All-Time Highs

Key Points

• Shopify’s Q2 financial results exceeded Wall Street analyst estimates.

• The business has a global reach, helping merchants in more than 175 countries.

• Investors should start paying closer attention to the stock’s valuation.

• 10 stocks we like better than Shopify ›

From the company's initial public offering in May 2015 to the peak in November 2021, shares of Shopify (NASDAQ: SHOP) had skyrocketed 6,480%. As of Sept. 25, they still trade 15% below that record.

But the business has been winning back enthusiasm from the investment community in tremendous fashion. The e-commerce stock has climbed an impressive 399% in just the past three years. Here's one reason Shopify is approaching its all-time highs.

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Image source: Getty Images.

Strong fundamental momentum

The market loves a good growth story. And Shopify has been delivering. Its latest financial results speak to the ongoing momentum the business has been experiencing, despite macro uncertainty caused by shifting trade policies.

During the second quarter (ended June 30), Shopify reported 31% year-over-year growth in gross merchandise sales that supported a 31% gain in revenue. Adjusted net income soared 32%. The sales and profit figures came in well ahead of Wall Street analyst estimates.

Shopify has enabled a whopping $1.2 trillion in commerce since its founding. Millions of merchants use its platform in over 175 countries, demonstrating its broad reach.

Reaching a new all-time high

Shopify stock has been on an absolute tear. It only needs to rise 18% from today's price to reach its previous high-water mark. If the company continues to put up robust financial results, hitting and exceeding this record is only a matter of time.

There is one potential headwind, though, and that's the valuation. Shares trade at a steep price-to-sales multiple of 18.6. That's 156% more expensive than exactly three years ago.

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.