Techquity
Technology Investor, Fundamental Research
Shopify is one of the best businesses around, but its valuation is too difficult to justify owning it. @profpicsou's article asks whether AI will destroy SaaS and whether Shopify, now a near-unavoidable commerce machine with millions of stores and a huge ecosystem, is well placed as plugins connect to ChatGPT, and at what price. Its section on AI and agentic impact is especially worth reading. x.com
Shopify is winning as AI brings more shoppers and sales to its merchants. Traffic from AI searches grew 8x and sales from them 13x, with those shoppers converting at a much higher rate, and four times as many stores now use its Sidekick assistant as last year. Its well-organized catalog of over 1 billion products lets AI search engines find items easily, doubling the chance of a sale, and it is working with Google, Amazon and Meta to set the rules for AI shopping. x.com
Shopify faces a lot of risk in the AI revolution, which limits its upside at a $185 billion market cap and its current multiple. It has executed very well, and management may stay ahead so its infrastructure capitalizes on the agentic wave instead of being overrun, but that is not guaranteed. Against other plays and an already heavy software allocation, it is a candidate to offload, possibly after another chance at its all-time high. x.com
Shopify is ripe for agentic AI disruption, which is why the market stays bearish despite cheap-looking multiples and growing revenue. Its main selling point is hundreds of plug-and-play features, yet most stores need only a few, so a bloated platform can be replaced by custom solutions built from a prompt. Logistics can come from firms like ShipMonk and payments from Stripe, and merchants can buy vibe-coded stores cheaply. The shift is moving fast, even if not for everyone today. x.com x.com … Show more
Shopify is becoming the infrastructure layer between merchants and AI agents, making AI a source of new demand rather than only a threat. In Q2, AI-driven traffic and orders tripled, and new-buyer orders from AI channels came at nearly twice other channels' rate. Its Catalog gives agents over 1 billion products with 2x higher conversion, and MRR growth reached 19%. A 79x forward P/E premium is justified by accelerating growth, strong retention and improving profitability, if execution holds. … Show more
Shopify is an outstanding company with elite management, but it is too expensive because it is evolving into a fintech and gross margins will likely compress over time. Merchant Solutions keeps growing faster than Subscriptions, even as GMV compounds exceptionally and take rates expand. It would be worth owning again at a lower valuation. x.com
Shopify is very expensive at 13x sales because it is really a fintech company, yet it trades at a tech multiple that stretches reality. x.com
Agentic AI commerce could unlock Shopify's next major growth opportunity. Revenue is projected to more than double from $11.6B to $24.2B by 2028, while EPS is expected to rise from $1.48 to $3.32, more than 2.2 times. x.com
Shopify's moat may not last if AI can build and run a store end to end without a platform taking 3% of GMV. CEO Tobi Lütke says over 50% of its code is now AI-generated; if that reaches 80% and then 95%, merchants and new AI-native startups can use the same models directly. The $101B GMV, 34% revenue growth and 15% FCF margin are real, so the 16% drop after a beat prices the moat's duration, not the quarter. The bypass need not be sudden, only a growing share of new commerce spend. x.com
Shopify's valuation remains the obstacle to buying, even though the business has several ways to keep growing. It is moving higher on the watchlist, but it is not a buy yet. x.com
Shopify is one of the clearest application-software examples of AI materially accelerating growth. Sell-side channel checks point to strong ongoing momentum and AI product attach rates, while Tobi keeps pushing to be first with new products and integrations. The shares are near their pandemic-bubble peak, yet still look discounted to this opportunity; the multiple is lofty, but nowhere near its 2021 level. x.com x.com x.com
Shopify's valuation still looks stretched against its prior lows, a concern that has never drawn a great rebuttal. Per GuruFocus, it trades at 10-11x EV/revenue versus roughly 6-7x in 2022. Having killed its fulfillment push to compete with Amazon FBA, Shopify is essentially a SaaS stock and should be valued like one. x.com
