Shopify (SHOP) Stock Plunges 11% Despite Beating Earnings - Time to Buy?

TLDR

Table of Contents

Shopify stock dropped 11% after Q4 results despite revenue jumping 31% to $3.67 billion and beating Wall Street estimates
Company projects Q1 revenue growth in low-30s range, crushing analyst forecasts of 25.1%, and launched $2 billion buyback
Analysts raised Buy ratings to 70% from 59% as AI disruption fears seen as overblown given Shopify’s comprehensive platform
AI-driven orders surged 15-fold since January 2025 with new partnerships including Starbucks, Estée Lauder, and Coach
Stock trades at 57 times forward earnings after 30% decline, down from three-year average of 107 times

Shopify shares plunged 11% this week even after delivering strong fourth-quarter results that exceeded analyst expectations. The e-commerce platform reported Q4 revenue of $3.67 billion, up 31% year-over-year and above the $3.58 billion consensus.

Shopify Inc., SHOP

The decline wasn’t about weak performance. Shopify got swept up in market-wide concerns about AI disrupting software companies. Investors worry brands will build storefronts through AI chatbots like ChatGPT and Gemini, cutting out platforms like Shopify.

But Wall Street analysts argue these fears miss the mark. Shopify offers more than website templates. The platform handles payments, shipping logistics, and inventory management in one package.

“The market is underappreciating the stickiness of the platform,” J.P. Morgan analyst Reginald Smith wrote Thursday. He highlighted Shopify’s AI tools built on data from millions of merchants and billions of transactions.

The company added major clients this quarter including Starbucks, Estée Lauder, Coach, and E.l.f. Cosmetics. Strong demand continues despite AI concerns.

Strong Q4 Performance Across Board

Gross merchandise volume climbed 31% to $123.84 billion. Europe led growth with GMV up 45%, or 35% in constant currencies. B2B GMV jumped 84% while offline GMV rose 29%.

Merchant solutions revenue increased 35% to $2.9 billion. Subscription revenue grew 17% to $777 million as customers upgraded plans. Monthly recurring revenue hit $205 million, up 15%.

Shopify Payments processed $84 billion in GMV, capturing 68% of total volume. That’s a 38% increase with four points of market share gain.

Management Issues Bullish Q1 Outlook

Shopify guided Q1 revenue growth in the low-30s percentage range. That crushed the 25.1% analyst estimate. The company also announced a $2 billion stock buyback program.

President Harley Finkelstein called Shopify in “pole position” for agentic commerce. Orders from AI searches jumped 15-fold since January 2025 as the company expanded AI platform partnerships.

Analysts Turn More Bullish After Selloff

Nearly 70% of analysts now rate Shopify a Buy, up from 59% in late January. Average price targets dropped to $163.11 from $181.48, but analysts see the pullback as a buying opportunity.

TD Cowen’s John Shao upgraded shares to Buy from Hold on Friday. He noted similar valuation drops in the past preceded strong rebounds.

Loop Capital Markets analyst Anthony Chukumba expects volatility to continue until the market realizes AI fears are exaggerated. That could take several quarters of strong results.

After its 30% year-to-date decline, Shopify trades at 57 times forward earnings. That’s below its three-year average of 107 times and one-year average of 76 times.

The forward price-to-sales ratio sits around 11 times 2026 estimates. Analysts consider that fair value given growth rates. The company spent years building AI infrastructure that’s now driving results as agentic commerce emerges.

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