I’ve made a lot of aggressive growth investments in my Stocks and Shares ISA over the last decade. And one of the largest has been Shopify (NASDAQ:SHOP).
Since my initial investment in 2017, the e-commerce giant has climbed more than 2,400%. And after drip feeding in more capital along the way, Shopify grew to almost 30% of my entire ISA portfolio earlier this year.
Today, it remains my largest ISA position (followed by Arista Networks, Intuitive Surgical, and MercadoLibre). Yet as a proportion of my overall portfolio, it’s now closer to 14%. That’s because since August, I’ve been steadily trimming shares and building cash. Here’s why.
Growth at a not-so-reasonable price
Looking at Shopify’s latest results, the business continues to impress. Ignoring Amazon, Shopify’s dominating the e-commerce space, particularly in the US, where roughly 29% of all online transactions now flow through its platform.
Even in 2025, with rising economic uncertainty putting pressure on discretionary consumer spending, e-commerce sales are proving far more resilient than many expect.
So much so that Shopify’s latest third-quarter results saw gross merchandise volumes jump 32% to $92bn, with revenue up 32% as well to $2.8bn. Operating profits also climbed by double-digits, along with free cash flow. And management remains confident that this impressive growth will continue throughout the fourth quarter, courtesy of the Christmas shopping spree.
Combining all this with continued AI innovations and global expansion, Shopify remains an exceptional business, in my eyes. However, as all experienced investors know, a high-quality business can still be a terrible investment if the wrong price is paid. And right now, Shopify shares are trading at a rather frothy valuation.
Price matters
Even on a forward basis, Shopify’s price-to-earnings ratio sits at a staggering 78. At the same time, its price-to-sales ratio’s just shy of 18. For reference, the stock market average for these figures has historically been closer to 15 and three respectively.
In other words, the stock’s trading at a massive premium. It’s not the only stock to have an overstretched valuation today. And sometimes, paying a premium can still be immensely rewarding. But in the current economic landscape, where inflation remains hot and job cuts are ramping up, things are looking increasingly unsustainable.
As a reminder, in the 2022 market correction, the S&P 500 dropped by 20%. Meanwhile, Shopify collapsed by 75% even though the underlying business was still performing strongly. And if my hunch is correct, we might soon see another market dip.
What I’m doing now
With my Stocks and Shares ISA now braced for potential volatility, I’m hunting for promising growth stocks to buy at a better price. And Shopify’s on that list.
Weakness in US consumer spending is a prominent risk, given that the company thrives on transaction volumes. And at the same time, rivals like Amazon and other niche e-commerce platforms remain a significant threat, applying pressure to margins and pricing.
Nevertheless, Shopify’s tremendous track record and scale advantage make me believe it could still be a long-term winner. That’s why I haven’t sold all my shares and why I’ll be using my newly-built cash position to buy more if a better price emerges. But it’s not the only growth stock I’ve got my eye on right now.
