Shopify continues to validate its position as a dominant player in the e-commerce infrastructure space, with Morningstar reiterating a Buy rating and a fair value estimate of $120 per share, representing a significant upside from the current market price of $107 (as of May 13, 2025). The stock jumped 3.2 percent in today's trade. Despite market volatility and macroeconomic uncertainties, the research underscores Shopify's wide economic moat, driven by high switching costs, product depth, and a scalable platform for merchants of all sizes.

Revenue for Q1 2025 surged by 27% year-over-year to $2.36 billion, slightly exceeding Morningstar’s expectations. The operating margin stood at 13.9%, underscoring improved efficiency. Merchant solutions contributed strongly, growing 29% YoY, while subscription revenue climbed 21%. The gross merchandise volume (GMV) expanded 23% to $74.8 billion.

Morningstar credits this performance to Shopify's ability to attract new merchants, penetrate international markets, and build momentum with enterprise clients.

Management expects mid-20% revenue growth in Q2, with gross profits rising in the high-teens range. Operating expenses are projected to account for 39% to 40% of revenue. Importantly, Shopify sees no signs of consumer weakness, and GMV trends remain healthy.

Morningstar assigns a wide moat rating to Shopify, driven by significant switching costs and a budding network effect. Its all-in-one platform, including payments, shipping, and capital services, creates a sticky ecosystem for small and medium businesses (SMBs).

Enterprise momentum, spearheaded by Shopify Plus, continues to grow. Clients moving up from the SMB segment benefit from staying within Shopify’s expanding feature set.

Morningstar maintains its $120 fair value estimate, implying a 2025 EV/Sales multiple of 14x and a free cash flow yield of 1%. Over the next five years, revenue is expected to grow at a 21% CAGR, driven by:

Despite its strong performance, Shopify earns a "Very High" uncertainty rating. The stock trades at rich valuations, with a P/E ratio of 98.4x for FY2025, leaving little room for execution missteps. Its core SMB customer base is more vulnerable in downturns, and retention rates for smaller clients are lower than for Shopify Plus users.

Shopify earns a Standard capital allocation rating, balancing investments, M&A, and internal R&D effectively. CEO Tobi Lütke, who has led the company since inception, is recognized for fostering strong organic growth with minimal dilution and a scalable, efficient business model.

Investors are advised to conduct their own due diligence before making investment decisions.