Key Takeaways
- Shopify fell 5% this morning because its third-quarter gross merchandise volume came in about $1 billion below what analysts expected, even though revenue grew 32%.
- KeyBanc raised its price target to $185 from $180 just before the report, and the drop leaves that target 25% above the stock.
- $185 works out to about 55x analysts’ 2028 earnings estimate, below the forward multiple Shopify has averaged over the last three years.
- The target looks reachable as long as 2028 earnings hold up, and that depends on lower operating costs making up for gross profit growing more slowly than revenue.
Shopify (SHOP) fell 5% today, after its third-quarter gross merchandise volume came up short. That leaves KeyBanc’s freshly raised $185 price target 25% above the stock.
A small miss in a strong quarter
Shopify’s GMV rose 29% to $119.1 billion in the third quarter, about $1 billion short of what analysts expected. Revenue grew 32% to $3.74 billion, right in line.
The rest of the report was better than that. Free cash flow came to $816 million, a 22% margin against 18% a year earlier. That was well ahead of the $723 million analysts expected. GAAP operating income jumped 66% to $568 million.
And for the fourth quarter, Shopify guided to revenue growth in the low thirties, at or above the roughly 30% analysts had penciled in.
TIKR tracks 54 analysts on Shopify. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Shopify, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Shopify’s Analyst Ratings
KeyBanc set its target before the miss
KeyBanc analyst Justin Patterson raised his target to $185 from $180 in his preview of the report and kept an Overweight rating. He expected Shopify to beat expectations, and he wanted the quarter to show what agentic commerce is adding for merchants.
Then GMV fell short, so it’s fair to ask whether $185 still holds with the miss in hand.
It isn’t an outlier, at least. 55 analysts cover Shopify, with targets from $120 to $220, and their average has climbed from about $166 to $177 over the past year:
Does $185 add up?
At [$140.80], Shopify trades at about 57x analysts’ 2027 EPS estimate of $2.46 and 42x their 2028 estimate of $3.36. KeyBanc’s $185 works out to 75x 2027 and 55x 2028.
A year from now, investors will be pricing Shopify on 2028’s earnings. And 55x would be well below the roughly 74x forward multiple Shopify has averaged over the past one and three years.
So $185 leaves room for the multiple to shrink, as long as the earnings arrive. Analysts expect normalized EPS to more than double from 2025 to 2028:
And I don’t see anything in this quarter that should push those estimates down: revenue grew 32%, free cash flow beat, and the guidance came in at or above expectations.
Margins have to keep up
Gross profit grew 28% in the quarter, slower than revenue, and Shopify guided fourth-quarter gross profit growth to the high twenties. So earnings growth depends on operating expenses continuing to fall as a share of revenue. Shopify’s own guidance has them at 29%-30% of revenue in the fourth quarter.
Analysts already expect some of that squeeze. Over the past year, they raised their 2027 revenue estimate 15% and their 2027 EPS estimate just 2%. And only 17 of them estimate 2028.
Still, I think KeyBanc’s case holds up. The target asks for a lower multiple than investors have paid for Shopify lately, on estimates I see little reason to cut after this quarter.
GMV is the number to watch. If it falls short again in the fourth-quarter report, due early next year, analysts will likely start trimming that $3.36, and I’d have a harder time defending $185.
So what is Shopify stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
