Jefferies and Stifel upgrade Shopify to Buy on AI infrastructure potential

Wall Street analysts at Jefferies and Stifel have upgraded Shopify Inc. (SHOP) to a 'Buy' rating, signalling a shift in sentiment toward the e-commerce platform’s role in artificial intelligence-driven commerce. Jefferies issued its upgrade on July 13, raising its price target to $160 from $140, while Stifel followed suit on July 10, lifting its target to $150 from $110. The moves come after Shopify’s share price declined approximately 23 per cent year-to-date, a period marked by market caution over forward guidance despite robust underlying financial performance.

The upgrades follow Shopify’s first-quarter results, which demonstrated significant growth across key metrics. Gross merchandise volume rose 35 per cent to $100.74 billion, while revenue increased 34 per cent to $3.17 billion. Operating income climbed 88 per cent, and the company generated $476 million in free cash flow at a 15 per cent margin. These figures contrast with a 16 per cent share price drop on May 5, which was triggered by forecasts of high-twenties revenue growth and operating expenses equating to 35 to 36 per cent of revenue.

Analysts argue that the market previously misinterpreted the impact of artificial intelligence on Shopify’s business model. Rather than viewing AI as an existential threat that could bypass traditional storefronts, Jefferies and Stifel now see it as a new distribution channel. Shopify is positioning its infrastructure beneath the AI interface, providing essential services such as structured product data, inventory management, payments, and fraud protection. This approach allows the company to capture transaction volume regardless of where the consumer journey begins.

A key component of this strategy is the Shopify Catalog, which structures billions of products for AI discovery, and the Universal Commerce Protocol, co-developed with Google. Additionally, the company’s free Agentic plan enables businesses on competing platforms to list products in the Catalog and transact through Shopify-powered checkout. Early data supports this thesis, with AI-generated traffic to Shopify stores increasing eightfold and orders from AI searches growing nearly thirteenfold in the first quarter.

Valuation remains a counterweight to the bullish outlook, with the stock trading near 13 times trailing revenue and more than 120 times reported earnings at approximately $125 per share. However, the company’s expansion of its share repurchase authorisation to $5 billion, combined with third-party data suggesting second-quarter gross merchandise volume is tracking above consensus, has bolstered analyst confidence. Jefferies anticipates a potential earnings beat on August 5, while Stifel projects revenue growth above 30 per cent in 2026.