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CEO Tobi Lutke provides the opening keynote of a Shopify event in Toronto on May 8, 2018.J.P. MOCZULSKI/CP

Shopify Inc. is the second-best-performing stock in the Canadian benchmark index this year, rewarding investors who have bet on a good growth story but also raising concerns about the stock’s valuation.

How long can Shopify continue to dazzle?

The shares, which recently rose above the $200 threshold in Toronto, are now up a total of 870 per cent since their debut in 2015. They have rallied 68 per cent this year alone, surpassing all but MEG Energy – up 75 per cent – in the S&P/TSX Composite Index.

With this sort of performance, it’s little wonder that the company – which develops and sells software to assist online merchants − is attracting a lot of attention.

The company has been featured in U.S. publications, including Fortune magazine. Analysts are generally giddy about Shopify: “We continue to recommend buying Shopify to leverage its growth,” Todd Coupland, an analyst at CIBC World Markets, said in a note to clients last month.

And some U.S. strategists include Shopify in their recommended stocks − a sure sign that the Ottawa-based company has arrived on the international scene.

David Kostin, chief U.S. equity strategist at Goldman Sachs, included the stock in a strategy note last week, titled Where To Invest Now.

Mr. Kostin noted that small-business optimism in the United States is at its highest level in 35 years, supporting a Goldman Sachs basket of stocks that comprise companies whose revenues are largely tied to small-and-medium sized businesses (or SMB). Shopify, where 95 per cent of its revenues are tied to SMB, made the basket.

At the same time, Shopify is being swept along a profound technology rally, as investors embrace companies reporting strong profit and revenue growth. The so-called FAANG stocks – Facebook Inc., Inc., Apple Inc., Netflix Inc. and Alphabet Inc.-owned Google – have been making most of the headlines.

But Twitter Inc., Adobe Systems Inc., Inc. and many other tech stocks have delivered double-digit gains even as the broader market struggles for direction amid rising interest rates and higher bond yields.

Shopify is right in the middle of this trend, and remains a go-to name within Canada’s relatively narrow technology sector.

Of course, not all of the attention is positive. Vocal short-sellers, who bet against a high-flying stock in the hope that the price will fall, are often attracted to stocks that appear to have risen well beyond their intrinsic value.

In October, Andrew Left of Citron Research recognized that Shopify was then the best-performing stock in the New York Stock Exchange (it has a dual-listing) in 2017. But he accused the company of appealing to customers with a “get rich quick scheme” that inflated the popularity of its software. He pegged the value of the stock at US$60, or about half its value at the time.

Mr. Left added to his concerns in March, though he appeared to revise his price target to US$100 – much higher than his earlier target, although it nonetheless implies a 40-per-cent dip from its current price in New York.

If Shopify is vulnerable to criticism, it is largely because the stock is pricey following its impressive rally. The company has not yet generated a full year of profit. And the shares trade at more than 10 times estimated revenue in 2019, according to Mr. Coupland. That’s expensive even when revenue is increasing annually at a 70-per-cent clip.

The company’s enterprise value is 12.9 times sales, or more than double the valuation of competitors such as Ltd. and PayPal Holdings Inc.

So what does this mean for Shopify’s share price as we approach the second half of 2018?

It’s a tough call. The stock remains vulnerable to any whiff of bad news regarding the company’s growth prospects. Yet it will clearly benefit from an ongoing infatuation with fast-growing technology stocks and an economy that is rewarding small-and-medium sized businesses.

Here’s one approach to consider: Ride the trends that are driving the stock higher until vocal short-sellers are finally silenced. Until then, the shares may be pricey but not priced to perfection.

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