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Shopify Inc. (SHOP) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Shopify Inc. (SHOP)

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Intrinsic Value (DCF)

Current$167.93
→
Intrinsic$47.27
-72%
$31.71$47.27$78.18
Current price reflects execution expectations above 25% growth — not unreasonable for quality businesses.
Range: Bear $32 → Bull $78. Current price implies expectations above the base case, closer to bull expectations.
Current price reflects assumptions at the upper end of our valuation range (bull case: $78).
Discount ↓Growth →21%23%25%27%
8%$60$65$70$75
10%$41$44$47$51
12%$31$33$35$38
14%$24$26$28$30

Bull Case

  • Bull case ($78) with 30% growth, 8% discount rate

Bear Case

  • Bear case ($32) implies 81% downside at 20% growth, 12% discount
  • Trading 72% above base case — execution must exceed assumptions to justify
  • Price exceeds bull case ($78) — requires exceptional execution
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5-Year Free Cash Flow Projection

Year 1$2.00B
Year 2$2.50B
Year 3$3.12B
Year 4$3.90B
Year 5$4.87B
Terminal$77.23B

📐 Model Inputs

Growth Rate25.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$1.60BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is SHOP stock undervalued or overvalued?
🔴 OVERVALUED

SHOP trades at $167.93 vs. our DCF-derived intrinsic value of $32.25, implying -81% downside. Using a 9.5% WACC and 25.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($47.71) suggests limited upside.

What is SHOP's intrinsic value?

Using a 5-year DCF model: Base FCF of $1.60B, projected at 25.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-372M net debt and dividing by 1.30B shares: Bear $21.71 | Base $32.25 | Bull $47.71. Current price $167.93 implies -81% to base case.

How is SHOP's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 25.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($41.60B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 26.1x.