Shopify (TSX:SHOP) is undeniably a giant in the e-commerce world. Its stock has had an exciting journey that reflects its dramatic growth and evolving strategy. As we look forward to 2025, there's much to unpack about whether Shopify stock is a buy, sell, or hold. From its recent earnings and past performance to its ambitious future plans, Shopify continues to be a focal point for investors. Let's dive into the details.

Recent performance

In its most recent earnings report for the third quarter (Q3) of 2024, Shopify stock delivered a robust 26% year-over-year revenue growth, bringing in US$2.16 billion for the quarter. This performance marked the company's sixth consecutive quarter, with revenue growth exceeding 25%, showcasing its ability to remain resilient in a competitive e-commerce landscape. Profitability was another highlight, with Shopify stock reporting a net income of $162 million compared to a $158 million loss in the same period a year ago. This pivot from losses to consistent profitability is a significant milestone and reflects the company's operational efficiencies.

Looking back, Shopify stock has been an incredible growth story. From empowering small- and medium-sized businesses to now courting larger enterprise clients, the company has recognized the need for diversification, both in its customer base and revenue streams. The shift toward onboarding large-scale clients like Reebok and Barnes & Noble reflects this strategic pivot. While onboarding enterprise clients involves higher upfront costs and complexity, these partnerships bring more predictable, long-term revenue.

Value priced in

Despite its glowing fundamentals, there are reasons for caution. Valuation remains a critical concern. Shopify stock trades at 73 times this year's expected earnings and 59 times its expected 2025 earnings, with anticipated growth rates of 52% and 22.5%, respectively. While these figures indicate strong investor confidence in Shopify's growth story, they also suggest limited room for error. Any earnings miss or slowdown in growth could prompt a significant stock price correction.

What keeps Shopify stock exciting is its knack for innovation and staying ahead of the curve. Its Shopify Magic initiative, which incorporates artificial intelligence (AI) to streamline user operations, is a prime example of this forward-thinking approach. By leveraging AI to help businesses create content, analyze sales trends, and optimize logistics, Shopify stock is not only enhancing its value proposition for existing customers. It's also attracting a broader audience.

Shopify's financial health is another reason for optimism. The company boasts a strong balance sheet with US$4.9 billion in cash and just US$1.14 billion in debt, giving it ample flexibility to invest in growth initiatives without compromising financial stability. Its current ratio of 7.10 indicates a very comfortable ability to cover short-term liabilities. Furthermore, its operating cash flow of US$1.45 billion and levered free cash flow of US$861 million reflect a solid cash-generating business — critical in supporting its aggressive growth plans.

Foolish takeaway

Still, the question of whether to buy, sell, or hold Shopify stock comes down to timing and risk tolerance. For investors with a long-term horizon, Shopify's trajectory looks compelling. The company's consistent revenue growth, expansion into enterprise-level clients, and strategic innovations position it as a leader in the e-commerce sector. However, for those wary of high valuations and broader market uncertainties, a "hold" strategy might be the more prudent choice at this time. Waiting for a clearer picture after Q4 earnings or a potential price dip could offer a more attractive entry point.

Shopify stock is a dynamic and innovative company with a bright future. Its focus on expanding its customer base, improving profitability, and enhancing its platform through AI are all steps in the right direction. For now, the prudent move for 2025 may be to hold the stock, especially for those already invested. For new investors, waiting for a more favourable valuation could provide a less risky opportunity to participate in Shopify stock's growth story. As always, staying informed and keeping a close eye on its upcoming performance will be key to making the best investment decision.