Key Points
Shopify's decision to embrace AI agents is helping the company gain market share.
Agentic transactions are growing at twice the pace of those involving large language models and generate orders twice as large.
The stock isn't cheap, but it is on sale.
Shares of Shopify (NASDAQ:SHOP) charged sharply higher on Wednesday, surging as much as 7.5%. As of 2:38 p.m. ET, the stock was still up 5.3%.
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The catalyst that sent the e-commerce platform provider higher was bullish commentary from a Wall Street analyst on the rising popularity of artificial intelligence (AI) agents and Shopify’s advantage.
Image source: The Motley Fool.
Gains from AI
Piper Sandler analyst James Callahan reiterated his overweight (buy) rating on Shopify while maintaining a $180 price target. Running the numbers suggests potential upside of 19% compared to Friday's closing price.
The analyst cites the increasing demand for agentic shopping tools imbued with artificial intelligence (AI), noting that agentic transactions are growing twice as fast as those involving large language models (LLMs) and that average order values are twice as much. He also suggests that migrations to Shopify's platform have "increased materially" as agentic shopping tools have grown in popularity.
This relates to the recent rise of shopping by AI agents on behalf of users and Shopify's decision to embrace the trend. Late last month, CEO Tobi Lütke announced that the company was partnering with Meta Platforms to embed the company's Muse personal AI agent into Shopify's platform. For context, Amazon took another path, blocking Muse from its platform, claiming the AI agent violated its terms of use.
Shopify stock has been on fire recently, gaining 66% since mid-May. Furthermore, at 106 times earnings, the stock won't be for everyone. However, it's worth noting that that's a significant discount to its three-year average multiple of 171.
Danny Vena, CPA has positions in Amazon, Meta Platforms, and Shopify. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Shopify. The Motley Fool has a disclosure policy.