Is Shopify’s 122% Rally Justified After Recent Product Investments and Partnerships?
October 28, 2025
If you’ve ever found yourself eyeing Shopify’s stock price and wondering if now is the moment to get in or get out, you’re far from alone. Over the past year, Shopify has put up numbers that are hard to ignore. The stock shot up 10% in the last week, soared 27.6% over the past month, and if you zoom out just a bit more, you’ll see it nearly doubled in the last year, rising 122.6%. That kind of performance grabs attention fast, and it’s no wonder investors are asking if the story can keep going or if all that optimism is already baked in.
What’s fueling this momentum? Alongside the broader recovery in tech names, Shopify has captured positive headlines for new product investments and strategic partnerships, not to mention ongoing confidence in the growth of global e-commerce. However, not all excitement in the news necessarily explains these bold price movements. Sometimes, it’s a matter of shifting risk appetite among investors, especially when a company has a track record of delivering on ambitious expectations like Shopify. Still, just because a stock’s been on a tear doesn’t guarantee it’s undervalued. In fact, according to our scorecard that checks for undervaluation across six measures, Shopify clocks in with a value score of 0 out of 6, meaning it isn’t undervalued by any of them right now.
Curious what those valuation checks actually are? Next, we’ll break down the methods analysts use to look for good value and hint at why there might be an even better way to size up Shopify’s true worth before you make your next move.
Shopify scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
A Discounted Cash Flow (DCF) model estimates the intrinsic value of a company by projecting its future free cash flows and discounting them back to today’s value. This method is widely used to assess what a business is really worth, based on the cash it can generate in the years ahead.
For Shopify, the starting point is its current Free Cash Flow, which stands at $1.80 billion. Over the next decade, analysts and modelers project steady growth, with Shopify’s Free Cash Flow expected to reach about $9.37 billion by 2035. It is worth noting that analyst forecasts are generally only available for the next five years, so further figures into the future are extrapolated for a broader picture.
Using these projections, the DCF analysis arrives at an intrinsic fair value of $93.25 per share. When compared to Shopify’s current share price, the results indicate that the stock is roughly 91.9% above its fair value. In straightforward terms, the DCF suggests Shopify is highly overvalued at these levels.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Shopify may be overvalued by 91.9%. Find undervalued stocks or create your own screener to find better value opportunities.
For companies that are generating consistent profits, the Price-to-Earnings (PE) ratio is often the go-to metric for valuation. It tells us how much investors are willing to pay today for each dollar of current earnings. The higher the expected growth in earnings and the lower the perceived risk, the higher a company’s “normal” or “fair” PE ratio tends to be.
Shopify’s current PE ratio is a striking 99.2x, putting it miles above the IT industry average of 30.1x and even above its peers, who are averaging around 42.3x. While rapid growth and market dominance can justify a premium, such a lofty PE number can be a signal to investors to pause and consider whether that optimism is sustainable.
Simply Wall St refines this approach further with the idea of a “Fair Ratio.” This isn’t just an industry average, but a proprietary benchmark that takes into account Shopify’s own growth prospects, profit margins, industry standards, market cap, and company-specific risks. By comparing the current PE to a Fair Ratio of 43.8x (calculated specifically for Shopify), you get a clearer, more nuanced picture of value than you would by relying solely on industry comps or peers.
That comparison leaves us with Shopify trading massively above its Fair Ratio. The bottom line, according to this approach: Shopify’s stock looks significantly overvalued based on its earnings.
Result: OVERVALUED
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned there is an even better way to truly understand valuation, so let’s introduce you to Narratives. A Narrative is the story behind the numbers: your personal outlook on Shopify’s future that connects what you believe about its growth, margins, and risks to an actual forecast and a Fair Value you can act on.
Narratives bridge the gap between financial forecasts and investment decisions, letting you set your own assumptions instead of relying solely on standard models or averages. With Simply Wall St’s Narratives feature on the Community page, you can easily build and share your company perspectives, joining millions of investors in putting their outlooks to the test.
This approach helps you decide when to buy or sell by continually comparing your Fair Value, based on your assumptions, against the current share price. Best of all, Narratives update automatically when new earnings or market-moving news emerges, so your valuation stays current as Shopify’s story evolves.
For example, recent community Narratives on Shopify range from bullish, targeting $200 per share due to international expansion and AI integration, to more cautious, setting a Fair Value as low as $114 per share based on competition and regulatory concerns. Your perspective and your decisions can now reflect your view of the story and the latest data, all in one place.
Do you think there’s more to the story for Shopify? Create your own Narrative to let the Community know!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include SHOP.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
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