E-commerce giant Shopify Inc (TSX:SHOP)(NYSE:SHOP) finished last week trading at just under $2,100 as it hit a new all-time high of $2,100.83 on the TSX. Year to date, the stock has soared more than 45%, outperforming the S&P 500 which has risen by just 25%.
The company is coming off an impressive third-quarter performance where it reported gross merchandise volume (GMV) of $400 billion U.S. across its platform. The company's president highlighted what an incredible growth trajectory the company has been on the past few years, noting that it took 15 years to get to $200 billion U.S. and then only 16 months to double that tally. Shopify's easy-to-use platform that allows anyone to sell items online has been rising in popularity during the pandemic with people looking to make money while stuck at home. Sales of $1.1 billion U.S.in Q3 were up 46% year over year.
The biggest problem with the stock is undoubtedly its high valuation. Without a huge profit to accompany that revenue growth, Shopify trades at a multiple of 62 times its earnings. That's a hefty price tag to go along with its already high price-to-sales multiple of 50.
Shopify isn't a cheap buy and multiple brokerages don't have it going higher than $2,200 so the upside for investors at this point may be limited. While Shopify's been a quality holding for multiple years, delivering returns of more than 3,500% since 2017, it could finally be approaching a peak. A return to normal in the global economy and online sales potentially slowing down could lead to some softness in
Shopify's price next year. The stock could still climb higher but at its current price, it's a much riskier buy than it was just a few months ago.