Sentiment Slump Fails to Derail Shopify’s (SHOP) Gradual Ascent

Since my last update on Shopify (SHOP), the macro backdrop has shifted, and it wasn’t subtle. The Fed delivered a 25-basis-point rate cut on September 17 as expected, although the accompanying commentary was significant. Fed Chair Powell sounded deliberately cautious, framing policy as still “modestly restrictive” and reiterating that the path from here is data-dependent.

The series of rate cuts expected by gleeful market participants is not a foregone conclusion, despite giddy investors thinking it already is. With the labor market again struggling instead of flourishing as expected, the Fed is once again fighting market expectations as much as it is attempting to meet macro targets.

For Shopify, that mix lowers the discount-rate ceiling but keeps the market hypersensitive to each print. I’m staying Bullish on the stock, but this week the story tilts toward logistics costs, consumer mood, and the next round of inflation/employment data.

SHOP Partners With LTIMindtree for AI Commerce Center of Excellence

There has been no blockbuster product launch or anything exciting since my last week’s update, but one relevant development that has emerged revolves around LTIMindtree, which announced a partnership with Shopify to build an AI Commerce Center of Excellence.

According to the two firms, the move aims to “facilitate enterprise migrations” and AI-driven merchandising/operations. It’s still very early days for shareholders to get excited, but even a small profit and loss (P&L) bump would still reinforce Shopify’s upmarket push and its “AI-everywhere” posture as peak season ramps up.

Logistics Costs Take Center Stage

In the meantime, peak-season surcharges are about to hit merchant P&Ls. UPS will apply Demand/Surge Fees starting September 28, such as additional handling of $8.25 per package (9/28–11/22) and $10.80 (11/23–12/27), with large package and over-maximum fees stepping up as well.

FedEx (FDX) also outlined its 2025 surcharge frameworks and recent fee changes. While the structures differ, the direction is the same, including the fact that holiday shipping will become pricier. For many Shopify sellers, that’s a margin and conversion headwind unless offset with pricing or smarter fulfillment rules.

Table showing a summary of Shopify’s margins.

There is a partial offset, however, revolving around the fact that ocean freight continues to ease. Drewry’s World Container Index fell 6% w/w on September 18 to $1,913 per 40ft, marking the fourteenth straight weekly decline, and reducing landed costs for importers running replenishment cycles into Q4.

And at the pump, the national average for regular gasoline stands near $3.16/gal today, a touch below year-ago levels, which is helpful for discretionary spending and for parcel fuel surcharges that fluctuate with fuel prices.

Consumer Pulse and GMV Read-Through

The August retail sales report surprised to the upside (+0.6% m/m; +5.0% y/y), with nonstore retailers up ~10.1% y/y, which serves as a decent proxy for Shopify-exposed GMV. However, in early September, psychology slipped, with the University of Michigan’s preliminary sentiment falling to 55.4, the lowest since May, despite one-year inflation expectations still being elevated.

The push-pull we are examining is clear, as realized spending appears fine, but confidence is wavering. As we enter the holiday season, promotions are expected to rise, which argues for heavier targeting and careful A/B testing around free-shipping thresholds to protect gross margin.

What to Watch Next, and Why It Matters

So here’s what to watch in the coming period that could indirectly impact Shopify’s investment case.

• Fri, Sept. 26 — Personal Income & Outlays (PCE). This is the Fed’s preferred inflation gauge. A soft core PCE read nudges the market toward expecting another move at the Oct. 28–29 meeting, supporting SHOP’s multiple and lowering merchants’ working-capital costs to peak. A hot print revives “higher for longer” chatter and would likely pressure long-duration names that have rallied post-cut.
• Wed, Oct. 1 — ISM Manufacturing. Weak new orders/prices-paid would reinforce the disinflation narrative (good for rates), but too-weak manufacturing can spook cyclicals and ad budgets.
• Fri, Oct. 3 — September Jobs Report. Consensus focus is squarely on whether unemployment drifts above 4.3% and if payrolls undershoot the trend. The Chicago Fed has just launched a real-time unemployment gauge, pointing to a rate of ~4.3% for September. If the official print is materially higher with soft wage growth, the market leans into more cuts. A strong payroll beat with firm earnings growth would have the opposite effect.

Policy Wild Card Marches Woward The Docket

Tariffs remain a live round for cross-border sellers. On November 5, the Supreme Court will hear oral arguments on the IEEPA-based duties, following lower-court rulings against them (currently stayed pending review). A decision to limit these tariffs would cut landed costs and ease DDP pricing for Shopify’s international carts. An affirmation, however, would preserve friction through the holiday season—and potentially longer.

Is Shopify a Buy, Sell, or Hold?

Wall Street remains relatively bullish on Shopify, with the stock carrying a Moderate Buy consensus rating based on 20 Buy and 13 Hold recommendations over the past three months. Not a single analyst is bearish on SHOP. In the meantime, SHOP’s average stock price target of $165.29 — which is unchanged from last week — suggests ~11% upside from current levels.

See more SHOP analyst ratings

Tariffs, Freight, and Fed Moves Influence SHOP’s Setup

This week’s incremental truth centers on inputs. Shipping surcharges are climbing, while ocean freight and fuel bring some relief. Sentiment slipped even as sales held firm, and the Fed is easing—gingerly. For SHOP, that points to steady near-term execution: doubling down on AI-driven merchandising and enterprise migrations (e.g., LTIMindtree), while equipping merchants to offset rising last-mile costs through smarter rate-shopping and cross-border workflow tools.

My stance stays Bullish, but the tape near-term turns on Friday’s PCE and next week’s ISM/jobs prints. If inflation cools and labor softens (slightly), multiples should find support. If inflation re-heats or jobs surge, the rate path gets repriced—and SHOP may face chop until the holiday demand curve proves itself.