My favorite growth stock over the past several years has been Shopify (NYSE:SHOP). More than two years ago, I called Shopify stock the most exciting stock in the market and said it was in the early stages of turning into the next big growth stock, thanks to its favorable direct-to-consumer and e-commerce trends. Ever since, I’ve reiterated time and time again that Shopify stock was a long-term winner that was destined to generate huge returns.

Over that stretch, Shopify stock has surged 300% to all-time highs. The S&P 500 is up just 28% over the same period. The big question now is whether Shopify stock can keep climbing in 2020.

I think it can. But I believe that it will rise at a much slower pace.

The reality is that SHOP is stock is expensive. I wouldn’t say it’s overvalued. But it is fully valued, and its full valuation will limit the magnitude of its gains going forward. At the same time, though, SHOP is a growth stock with a ton of momentum, and such stocks tend to keep grinding higher as long as their growth remains strong.

In 2020, Shopify will continue to grow rapidly, so SHOP stock will rise further. But it won’t climb by that much.

I don’t recommend chasing the rally of Shopify stock because it’s too expensive to chase. But investors should not sell  all of their SHOP stock either. It’s too good of a story with too much momentum. Instead, they should be patient, buy Shopify stock on pullbacks, and hold onto its shares for the long haul.

Shopify Stock Is Expensive

Trading at over 30 times trailing sales and over 400 times the average forward earnings estimate, SHOP stock is definitely expensive.

But it’s not too expensive yet. High-growth stocks have huge valuations because they have the opportunity and firepower to grow into those high valuations with sustained rapid growth. That’s exactly what Shopify offers.

There are two major trends in the retail world: more shopping is being done on digital platforms because it’s more convenient and direct-to-consumer selling is proliferating because it gives brands more control over their customers’ experience. Thus, the future of retail is direct-to-consumer (DTC) e-commerce.

Shopify is the backbone of this model, offering unparalleled tools to help retailers and merchants of all sizes directly sell their products to customers online.

As the DTC e-commerce model gains traction over the next decade, Shopify’s relevance to retailers throughout the world will grow by leaps and bounds. Today just 1.4% of total e-commerce sales go through Shopify’s websites. Within the next decade, that number could easily rise to 5% or higher. The significant expansion of SHOP’s market share will cause SHOP’s revenue to rise rapidly over a long period of time.

My modeling suggests that Shopify’s earnings per share will reach about $20 to $30 by fiscal 2030. Based on a FY30 forward price-earnings multiple of 35 and a 10% annual discount rate, that implies a 2020 price target for Shopify stock of somewhere between $300 and $450. Right now, the shares are nearing the upper end of that range, but they haven’t risen above the top end of the range.

Thus, while SHOP stock is expensive and its fundamentals only support limited further gains, its shares are not overvalued yet.

SHOP’s Growth Will Remain Robust

Growth stocks with a ton of momentum tend to sustain that momentum as long as their underlying companies’ growth remains robust. Shopify’s growth will remain strong in 2020. Thus, despite some concerns about the valuation of SHOP stock, SHOP’s continued high growth should enable SHOP stock to climb further in 2020.

Shopify’s growth will remain vigorous in 2020 thanks to three major factors. First, the economy will improve, boosted by easing geopolitical and trade tensions. As the economy improves, retailers and merchants globally will move more of their businesses online and spend more money on increasing their online presence. Simultaneously, consumer spending trends will improve. These dynamics will provide strong, positive catalysts for Shopify’s sales.

Second, SHOP will aggressively continue to expand its fulfillment network, further boosting its revenue growth outlook. Specifically, Shopify really just started its fulfillment network expansion in 2019.  In 2020, SHOP will further expand the network, making SHOP a more reliable delivery partner, and, therefore, a more reliable commerce partner. As the company’s reliability grows, the growth of the number of merchants using SHOP will remain robust.

Third, the shift towards DTC e-commerce should gain momentum in 2020. That trend will be driven by more commerce being conducted on social media due to initiatives like Instagram Shopping, which was built using Shopify’s  tools.

Given all of these positive drivers, Shopify’s growth will likely remain strong in 2020, causing  Shopify stock to grind higher.

The Bottom Line on SHOP Stock

Shopify stock is a winner that investors should own for the long haul. But I wouldn’t buy Shopify stock at its current high levels because it’s simply too expensive to buy. At the same time, I wouldn’t recommend that investors sell all of their shares of SHOP stock because the company has  enough firepower to keep the stock in rally mode.

Instead, I’d just be patient. Those who  own SHOP stock should take a little profit, but they should not sell all of their shares. Investors who don’t own SHOP should not buy the shares at their current elevated levels. Wait for a pullback (one will happen eventually) before buying SHOP.

As of this writing, Luke Lango was long SHOP.