Could Shopify Stock Join the $1 Trillion Club by 2030?

E-commerce is a great place to invest for the long term. The global e-commerce market will expand at a compound annual growth rate of 18.9% between now and 2030, when it will be worth approximately $83.3 trillion, according to estimates from Grand View Research.

One company likely to be a key part of that growth is Shopify (NYSE: SHOP). Its e-commerce platform makes it easy for merchants to sell products and services online, and for them to reach markets they otherwise might not have been able to, allowing them to easily grow their presence around the world.

Today, Shopify has a market cap of about $105 billion, and it would need to be a 10-bagger investment to reach a $1 trillion valuation. But with so much growth expected for the world of e-commerce, can Shopify actually reach that level by 2030?

Shopify has a lot of growth catalysts that can drive its sales higher

One of the reasons why Shopify stock has struggled in recent years is because its growth rate has slowed. After a surge in e-commerce activity during the early stages of the pandemic, that growth proved fleeting as online retailers experienced a significant slowdown in the later stages of the health crisis. Add to that the inflation that has chipped away at consumers' budgets, and business simply hasn't been as strong for Shopify of late.

Data by YCharts.

But there's reason to be optimistic that Shopify can accelerate its growth in the future. It has extended its own reach in the world of e-commerce, recently partnering with big-box retailer Target to help popular Shopify merchants sell products on Target's digital marketplace as well. Even Amazon, which investors have long considered a significant rival to Shopify, has partnered with the e-commerce company and now allows Shopify merchants to use "Buy with Prime," which will make products more appealing to Prime users who want to benefit from fast delivery options.

Shopify has also jumped on the artificial intelligence (AI) bandwagon and offers an assistant that can help merchants with creating better descriptions for their products, allows them to utilize an AI image-editing tool, and can even assist customers with questions, along with providing other valuable services.

Through all these initiatives and partnerships, it's feasible for Shopify's growth rate to accelerate in future quarters, but it's just a question of how high that rate may get.

Shopify isn't an expensive stock when you factor in its growth potential

Based on its recent earnings numbers, you might see Shopify as being an expensive stock to own. It's trading at a trailing price-to-earnings multiple of 83. Even when you factor in near-term growth expectations, the stock trades at 60 times analyts' projections for 2025 earnings.

But if you go further out and take into account the next five years, Shopify stock is trading at a more reasonable price/earnings-to-growth (PEG) ratio of 1.3. The lower the PEG ratio gets, the better the value it's supposed to be, with a multiple below 1 commonly being associated with an undervalued stock.

The key will be whether Shopify will indeed achieve the more than 45% annual earnings growth analysts expect it to deliver the remainder of this decade. Since reversing course on the strategy to build out its own logistics and fulfillment network, earnings growth has indeed improved, though the company has yet to return to the peak levels of profitability it saw early in the pandemic.

Can Shopify stock get to $1 trillion?

However, Shopify stock would need to return an average of about 45% per year through 2030 for its market cap to hit $1 trillion. That's a tall order for even a small-cap growth stock, let alone a $105 billion industry leader. There is no guarantee macroeconomic conditions will cooperate, and a recession could derail its path forward as consumers would cut back on their spending.

But that doesn't mean Shopify can't reach the $1 trillion milestone further into the future, given the overall e-commerce industry's outlook and recent developments at the company. For investors willing to buy the stock and hold it into the next decade and longer, Shopify can still make for an excellent investment to add to your portfolio today.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Shopify, and Target. The Motley Fool has a disclosure policy.