There are numerous parallels between Shopify (NYSE: SHOP) and Amazon (NASDAQ: AMZN). They are both top performers in the e-commerce sector, excelling in their respective markets and leading the way in the industry. They have both generated substantial wealth for many individuals and continue to attract significant interest from shareholders.
Shopify is the fresher, more dazzling stock, having surged by nearly 3,000% since its IPO. Meanwhile, Amazon has seen a growth of around 730% during the same period, but its incredible increase of 184,000% since its initial public offering is truly mind-boggling.
Newer does not always equate to better. Amazon’s stock has surpassed Shopify’s performance over the past year, having risen by 19% so far in 2024, while Shopify’s stock has remained relatively flat year-to-date. While Shopify still holds considerable potential, Amazon stands as a consistent victor with ample opportunities.
The entirety of the globe belongs to Amazon
Amazon leads the way in two of the largest and quickest expanding sectors worldwide – e-commerce and cloud computing. E-commerce is progressively becoming a larger portion of retail sales, and Amazon is reaping the benefits, being responsible for nearly 40% of all e-commerce sales in the United States. By speeding up deliveries and boasting an unmatched product selection, it has solidified its position and ensured that no other competitor comes even close, making it the preferred retailer for its millions of Prime members.
E-commerce remains its primary source of revenue, surpassing all other segments. However, Amazon Web Services (AWS) is equally critical for two reasons: despite accounting for only a mid-teens percentage of revenue (14% in the fourth quarter), it contributes more than half of the total operating income and offers significant market potential. Although the growth rate of AWS sales had previously outpaced the overall business, it has slowed down as clients cut back on spending in the current inflationary environment. Nevertheless, management anticipates a shift, citing new contracts with major clients like Merck and Hyundai.
The integration of artificial intelligence (AI) across all operations is a key strategy for Amazon. The potential for generative AI within AWS is enormous. Amazon leads the way in this field and provides a range of competitive tools that could be groundbreaking for clients.
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