Better Buy: Shopify Stock or Amazon?

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A shopper makes a purchase from an online store.

Before being sold in 2022, Technology stocks Delivered exponential returns to shareholders. For example, Shopify (TSX:Shop) shares went public in early 2015 and rose close to 5,550% since its IPO and the end of 2021. Amazon (Nasdaq: AMZN) increased by 1,830% between 2012 and 2021.

However, as macroeconomic conditions worsened, investors worried about the high valuations surrounding these tech stocks. A triple whammy of inflation, interest rate hikes, and a global economic slowdown accelerated sales in 2022.

Currently, Shopify stock is down 70% from its all-time high, while AMZN stock is down 46% from its all-time high. Now let’s see which e-commerce stock should be first on your shopping list.

The Bull Case for Shopify Stock

Despite pulling back in 2022, Shopify is worth a Market cap $80 billion. Shopify is now the second largest e-commerce platform in North America and is poised to benefit from an expanding addressable market.

Shopify continues to expand its collection of products and services to increase business spending on its platform. Over the past year, it has allocated substantial resources to build and expand its fulfillment center network. This upgrade should improve the supply chain for its merchant base.

Although the company’s top-line growth has slowed in recent months, Shopify still reported 22% year-over-year sales growth to US$1.4 billion in Q3 2022. Comparatively, its total sales volume and total payment volume increased by 11% and 22% respectively. % respectively in the September quarter.

SHOP stock is already up 32% after revealing its intention to raise subscription plans for its merchant platform for the first time in more than 10 years.

Analysts tracking SHOP stock expect the company to grow sales 19.5% to $7.4 billion in 2022 and 19.7% to $8.8 billion in 2023. So, we can see that Shopify is now more than nine times the price of forward sales, which is even steeper. Still, analysts remain bullish and expect shares of TSX tech stocks to rise 20% over the next year.

The Bull Case for Amazon Stock

One of the largest technology stocks globally, Amazon is part of Warren Buffett’s portfolio. While it operates as the world’s largest e-commerce platform, Amazon is the largest public cloud infrastructure provider and the third largest platform for digital advertising.

Amazon reported losses for the first three quarters of 2022 due to a slowdown in consumer spending and rising costs. Additionally, online sales are closer to pre-pandemic levels as economies reopen.

However, e-commerce sales in the U.S. account for less than 15% of total retail sales, giving Amazon enough room to grow its revenue over the coming decade. Amazon’s digital advertising division posted sales of US$26.2 billion in the past three quarters, up 30% year-on-year, despite lower corporate ad spending. Amazon is very likely to double its ad sales by the end of 2027.

Analysts tracking AMZN stock expect shares to rise 35% over the next 12 months.

Stupid carrying

Since both Amazon and Shopify are good long-term bets, it can be difficult to pick a winner between the two. Amazon has a highly diversified business model, which minimizes investment risk for shareholders. But Shopify may offer higher returns, making it a better buy for those with a significant risk appetite.

Position Better to buy: Shopify stock or Amazon? appeared first Motley Fool Canada.

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Further reading

John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. Stupid contributor Aditya Raghunath No position in any of the shares mentioned. The Motley Fool has positions and recommends Shopify. The Motley Fool recommends A motley fool Disclosure Policy.


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