Shopify: As Trade Tensions Ease, Is the Stock a Buy?
The e-commerce company continues to see solid top-line growth as it expands Shop Pay and adds new customers.
The stock is not cheap.
10 stocks we like better than Shopify ›
Though its stock price dipped following the release of its first-quarter results on May 8, Shopify (NASDAQ: SHOP) shares have rallied sharply since news has come out that points to an easing of the intense trade tensions between the U.S. and China (at least for the short term). The stock is now up modestly on the year and has risen more than 80% over the past year, as of this writing.
While the e-commerce company is not directly impacted by President Donald Trump's tariffs, its core customers -- most of them small and medium-sized merchants -- are. If higher costs across the board for American consumers lead them to tighten their belts, or if tariffs cause some smaller retail merchants to close up shop, that would certainly impact Shopify's business.
As such, it should have come as little surprise that the company issued somewhat cautious guidance when it reported its Q1 earnings results. By contrast, the positive news on the trade front that has come out more recently bodes better for Shopify.
With all that in mind, is this a good time to buy the stock?
In the first quarter, Shopify's revenue jumped by 27% year over year to $2.36 billion. Its high-margin subscription revenue rose 21% to $620 million, while its merchant solution revenue soared by 29% to $1.74 billion.
Gross profit dollars rose 22% to $1.17 billion. Given the gross margin difference between its subscriptions and merchant solutions, this metric is more reflective of the company's growth. Adjusted earnings per share (EPS), meanwhile, climbed 29% to $0.44, coming in just ahead of the $0.43 consensus. Its gross merchandise volume (GMV), which is the total dollar value of the sales transacted through its platform, rose by 23% to $74.8 billion. It was the seventh straight quarter of GMV growth of 20% or more.
Metric
Q1 2025
Growth (YOY)
Gross merchandise volume (GMV)
$74.8 billion
23%
Revenue
$2.36 billion
27%
Subscription revenue
$666 million
21%
Merchant Solutions revenue
$1.74 billion
29%
Gross Profit
$1.17 billion
22%
Adjusted EPS
$0.44
29%
Data Source: Shopify. YOY = Year over year.
Business-to-business GMV was once again strong, soaring by 109% year over year. International GMV growth was 31%, with cross-border growth of 15%. Offline GMV, meanwhile, rose 23%.
Shop Pay, the company's online checkout and payment processing solution, continued to be a growth driver, with GMV up 57%. It expanded the solution to 16 new countries in the quarter, bringing the total to 39 countries. Meanwhile, Shop App, which aggregates products and brands from Shopify-powered stores, saw its GMV soar 94%.
Shopify also continues to do well in its efforts to move upmarket and bring enterprise-level customers to its platform. During the quarter, it added Purple, Lilly Pulitzer, and Birkenstock to its customer list, and this week it expanded with a few new Tapestry brands, adding online shops for Coach, Kate Spade, and Kate Spade Outlet.
Looking ahead, management forecasts that its second-quarter revenue would rise at a mid-20s percentage rate, with gross profits growing at a high-teens percentage rate. The revenue guidance was above the analysts' consensus estimate of 22% growth, but the gross profit outlook was below the 20% growth that analysts had, on average, projected. As noted above, I think gross profit is the more important number to watch with this company.
Management said it can quickly respond to tariffs through new features, such as a duty-inclusive tool that allows merchants to set international prices that include duties in the product price. It has also introduced an artificial intelligence (AI) tariff solution that can provide duty rates based on just a product description and its country of origin.
Shopify continues to put up strong growth. It's adding new customers, which is reflected in its subscription revenue growth. It's also doing a great job of increasing Shop Pay adoption, which allows it to grow with customers. Expanding Shop Pay into more countries will only help power the business's growth. It's also helping its customers drive growth through things like the Shop App.
The company has also done a nice job of moving beyond small online merchants. It's seeing strong growth in business-to-business, offline, and with large enterprise customers.
I would recommend gauging the stock based on the company's gross profit multiple. Based on management's guidance for gross profit growth in the low 20s percentages, we can expect approximately $5.45 billion in gross profits this year. If that proves accurate, Shopify is trading now at about 25.5 times 2025 gross profits. I think that's a bit high given its growth rate. For context, Toast, which employs a somewhat similar model in the restaurant space and is growing at a faster pace, trades at a gross profit multiple of 14.
As such, I would not chase Shopify's stock after its recent rally.
Before you buy stock in Shopify, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Shopify wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $613,951!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $796,353!*
Now, it's worth noting Stock Advisor's total average return is 948% — a market-crushing outperformance compared to 170% for the S&P 500. Don't miss out on the latest top 10 list, available when you join .
See the 10 stocks »
*Stock Advisor returns as of May 12, 2025
Geoffrey Seiler has positions in Toast. The Motley Fool has positions in and recommends Shopify and Toast. The Motley Fool recommends Tapestry. The Motley Fool has a disclosure policy.
Shopify: As Trade Tensions Ease, Is the Stock a Buy? was originally published by The Motley Fool
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
9 minutes ago
- Yahoo
Oil prices set to snap two-week losing streak as peace in Ukraine remains elusive
(Reuters) -Oil prices were little changed on Friday but were on track to snap a two-week losing streak as hope for immediate peace between Russia and Ukraine dimmed, increasing the risk premium demanded by oil sellers. Brent crude futures were down 4 cents to $67.63 a barrel at 0052 GMT, while West Texas Intermediate (WTI) crude futures fell 1 cent to $63.51. Both contracts climbed more than 1% in the prior session. Brent has risen 2.7% this week, while the WTI has gained 1.1%. Traders are pricing in more risk as hope that U.S. President Donald Trump can quickly broker a deal to end the war, which propelled a sell-off in oil over the last two weeks, fades. The three-and-a-half-year war continued unabated on Thursday as Russia launched an air attack near Ukraine's border with the European Union and Ukraine said it hit a Russian oil refinery. Meanwhile, U.S. and European planners said they have developed military options by allied national security advisers. That followed the first in-person talks at the weekend between the U.S. and Russian leaders since Russia invaded Ukraine, which have so far yielded little progress toward peace. Russian President Vladimir Putin demanded Ukraine give up all of the eastern Donbas region, renounce NATO ambitions and keep Western troops out of the country, sources told Reuters. Trump pledged to protect Ukraine under any war-ending deal. Ukraine President Volodymyr Zelenskiy dismissed the idea of withdrawing from internationally recognised Ukrainian land. Oil prices were also supported by a larger-than-expected drawdown from U.S. crude stockpiles in the last week, indicating strong demand. Stockpiles fell 6 million barrels in the week ended August 15, the U.S. Energy Information Administration said on Wednesday. Analysts had expected 1.8 million barrels. [EIA/S] Investors were also looking to the Jackson Hole economic conference in Wyoming for signals of a Federal Reserve interest rate cut next month. The annual gathering of central bankers begins on Thursday, with Fed Chair Jerome Powell speaking on Friday. Lower interest rates can stimulate economic growth and increase oil demand, potentially boosting prices.
Yahoo
32 minutes ago
- Yahoo
The U.S. May Experience Negative Net Migration For The First Time In 50 Years. Here's What That Means For The Economy.
Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below. It was just a year ago when immigrants were entering the country in droves. The narrative has quickly shifted, and the White House recently featured a CNN report on its site touting that the country is on track toward negative net migration for the first time in at least 50 years. CNN Politics Senior Analyst Harry Enten said it's possible that we see a 2.8 million year-over-year negative net migration when it's all said and done. President Donald Trump campaigned on a tight border and has delivered on that promise, but this dramatic shift will affect the economy. It's not all good, but it's not all bad, either. These are some of the realistic ways negative net migration will affect the economy. Don't Miss: The same firms that backed Uber, Venmo and eBay are investing in this pre-IPO company disrupting a $1.8T market — 'Scrolling To UBI' — Deloitte's #1 fastest-growing software company allows users to earn money on their phones. A Shrinking Workforce Removing able-bodied workers from an economy will reduce the workforce and reduce economic output. Fewer people in the workforce result in fewer products being produced and fewer services being fulfilled. However, not everyone loses from a shrinking workforce. Fewer workers give the remaining workers more leverage, which can translate into wage growth. Businesses will have to pay higher prices for workers, which can be a boon for people who feel like their salaries haven't kept up with inflation. Continuing to bring in new migrants would put downward pressure on wages due to a higher supply of workers. Some businesses may raise prices since they have to pay higher labor costs, contributing to inflation in the process. American workers should see nominal wage growth due to negative net migration, but real, inflation-adjusted wages show whether these changes will be a net benefit or setback for the typical worker's purchasing power. Trending: Kevin O'Leary Says Real Estate's Been a Smart Bet for 200 Years — Uncertainty Around Housing Costs The U.S. Census Bureau's population clock shows that there are approximately 342 million people in the country. A negative net migration of 2.8 million individuals represents a 0.1% decrease in the population. Any population decrease will reduce housing costs since fewer people are trying to buy and rent the same number of housing units. For instance, Japan housing prices have been dropping in tandem with its population decline, according to Business Insider. Negative net migration isn't the only way to address housing costs, but it can have an unintended effect. In this case, it won't be life-changing for Americans who want to become homeowners. Although housing demand decreases as populations decline, negative net migration may increase construction costs. The construction companies that hired illegal immigrants will have to turn to more expensive American workers, who will suddenly have more leverage in negotiations. Undocumented workers tend to have lower wages, according to Econofact, so American workers represent higher costs for companies. It's exactly what Trump and his advocates envisioned, but more American workers in construction may come with higher construction costs, which can lead to higher housing prices. Can negative net migrations and higher wages for Americans offset rising construction costs? We will have to wait and Taxpayers Governments rely on tax revenue to fund social programs and other initiatives for the country's welfare. When illegal immigrants are forced out of the country, it reduces the number of taxpayers. For instance, undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022, according to a report from the Institute on Taxation and Economic Policy. The same report said that they paid $25.7 billion in Social Security taxes. However, a negative net migration may not be detrimental to social programs like Social Security. While the Institute on Taxation and Economic Policy report indicates that illegal immigrants contributed $25.7 billion to the program in 2022, Social Security collected more than $1 trillion that year. That means the contribution from illegal immigrants was less than 2.5%. Fewer undocumented immigrants also lets social programs allocate more of their existing time and resources toward U.S. citizens. The impacts of negative net migration – positive or negative – ultimately depend on who ends up leaving the country. Getting rid of productive workers will hurt the economy, but advocates for deportation claim that taxpayer funds went toward housing illegal immigrants. This rationale asserts that the savings from no longer having to house illegal immigrants can offset losses in productivity. Negative net migration isn't a clear positive or negative for the economy. There are meaningful pros and cons to the approach, and its impact on the economy and Americans will become more apparent over time. Read Next: , which provides access to a pool of short-term loans backed by residential real estate with just a $100 minimum. Image: Shutterstock This article The U.S. May Experience Negative Net Migration For The First Time In 50 Years. Here's What That Means For The Economy. originally appeared on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
38 minutes ago
- Yahoo
Alpina Holdings' (Catalist:ZXY) Earnings May Just Be The Starting Point
Even though Alpina Holdings Limited's (Catalist:ZXY) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. A Closer Look At Alpina Holdings' Earnings One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the accrual ratio. To get the accrual ratio we first subtract FCF from profit for a period, and then divide that number by the average operating assets for the period. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'. As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. That is not intended to imply we should worry about a positive accrual ratio, but it's worth noting where the accrual ratio is rather high. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth. Alpina Holdings has an accrual ratio of -0.14 for the year to June 2025. That implies it has very good cash conversion, and that its earnings in the last year actually significantly understate its free cash flow. To wit, it produced free cash flow of S$11m during the period, dwarfing its reported profit of S$4.29m. Given that Alpina Holdings had negative free cash flow in the prior corresponding period, the trailing twelve month resul of S$11m would seem to be a step in the right direction. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Alpina Holdings. Our Take On Alpina Holdings' Profit Performance As we discussed above, Alpina Holdings has perfectly satisfactory free cash flow relative to profit. Because of this, we think Alpina Holdings' earnings potential is at least as good as it seems, and maybe even better! Furthermore, it has done a great job growing EPS over the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into Alpina Holdings, you'd also look into what risks it is currently facing. When we did our research, we found 3 warning signs for Alpina Holdings (1 is significant!) that we believe deserve your full attention. Today we've zoomed in on a single data point to better understand the nature of Alpina Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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. Error while retrieving data Sign in to access your portfolio Error while retrieving data
