Shopify (SHOP) shares closed more than 20% up on Wednesday after the e-commerce company reported significantly better-than-expected earnings for its second financial quarter. 

Investors cheered SHOP also because the management issued upbeat guidance for Q3, indicating confidence in the company’s ability to navigate higher tariffs under President Donald Trump. 

Shopify stock has been in a sharp uptrend over the past four months and is now up roughly 120% versus its year-to-date low in early April. 

Management Remains Bullish on Shopify Stock

Other than the headline numbers, there was plenty in the management’s commentary that warrants buying SHOP stock following its second-quarter financial release. 

For starters, executives confirmed that tariffs have not resulted in “any drop in US demand, whether inbound, outbound, or local.”

If anything, the market actually accelerated in the recently concluded quarter even in the wake of several Shopify merchants choosing to increase prices, added Jeff Hoffmeister, the firm’s CFO.

Shopify shares may be worth owning for the long term also because the e-commerce platform is aggressively spending on AI tools to attract and retain merchants. 

SHOP Shares Are Trading at a Premium Valuation

While there was hardly anything in the quarterly release to discourage initiating a position in SHOP shares, investors are still recommended caution primarily due to valuation concerns. 

Shopify stock is currently going for a forward price-earnings (P/E) multiple of more than 120x, which is much higher than peers including Amazon (AMZN) and Etsy (ETSY), both of which are trading at around 30x only. 

That’s why UBS analysts maintained their “Hold” rating on the Canadian company last week, and left their $110 price target unchanged, signalling potential for nearly 30% downside from here. 

How Wall Street Recommends Playing Shopify

Investors should remain wary of buying Shopify stock today since it’s already trading significantly above Wall Street analysts’ mean price target. 

According to Barchart, while the consensus rating on SHOP shares remains at “Moderate Buy,” the average price target of about $119 only indicates potential downside of more than 20% from current levels.