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Shopify (NYSE: SHOP) stock fell 15% in the first six months of the year, according to data provided by S&P Global Market Intelligence. It's still climbing back up from losses related to overexpanding its business and trading at a high valuation.

Shopify is an e-commerce leader

Shopify sells e-commerce services to business clients. It hosts a platform for small businesses to operate online, which is why you won't be buying products straight from Shopify. However, you're likely buying from companies using Shopify's services.

As an e-commerce player, it's one of the biggest in the world. Its clients sold more than $60 billion in gross merchandise volume (GMV) in the 2024 first quarter, which is more than Amazon sold online without the addition of third-party sales.

Although Shopify shot up to stardom through its Shopify stores or the subscription-based fully souped-up websites it offers, it has a more diversified set of services it provides for a large range of businesses of all sizes. It has all kinds of packages and single products that attract enterprise customers, in addition to its core small business clients, and these larger, higher-paying customers are generating higher sales.

Shopify overestimated demand when it enjoyed pandemic-fueled growth a few years ago and overbuilt its infrastructure. Last year, it took important steps to scale down, meet current demand, and become more efficient, and that's been paying off. Shopify has reported three straight quarters of positive free cash flow and operating income and several quarters of positive net income.

Does the price match the opportunity?

There's some debate as to how much future opportunity Shopify still has. It's already captured a lot of the e-commerce market, and sales growth is expected to slow down in the current quarter. The company's stock fell after the latest guidance after the quarter for a mid-teen increase.

What isn't up for debate is that e-commerce continues to gain as a percentage of retail sales and that Shopify is running an excellent business. It's still reporting double-digit growth, increasing 23% year over year in the first quarter, with an equal rise in GMV.

Management has taken the required actions to become leaner and focus on its core business. Shopify likely has years of profitable growth ahead and when the economy is more stable, it could move into newer growth areas.

However, Shopify stock is quite expensive. It trades at a price-to-sales ratio (P/S) of 11, which prices in some future growth.

There may not be so much near-term upside at the current price, but long term, Shopify could be a great stock to own. Investors may want to wait for a better entry point.

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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. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Shopify. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.