An In-Depth Analysis of Amazon and Shopify Stock A Deep Dive into Amazon and Shopify Stock Performance

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Wall Streetโ€™s buzz around tech stocks is reaching a fever pitch. The fervor focuses topically on artificial intelligence and enterprise services, areas that witnessed a surge in 2023-2024 amid waning fears of an imminent recession. Companies entrenched in these arenas are reporting accelerated sales growth and bolstered profitability, two key components bolstering their allure for investors.

Amazon (NASDAQ: AMZN) and Shopify (NYSE: SHOP) epitomize this trend. Despite their differing approaches, both have homed in on e-commerce and merchant services as pivotal conduits for long-term growth. Given this landscape, itโ€™s time to assess which of these standout stocks is better positioned for long-term investment.

Comparing Sales Trends

Amazonโ€™s colossal stature naturally limits its growth trajectory. Fourth-quarter sales surged 14%, catapulting from $149 billion to $170 billion year-over-year. Conversely, Shopify demonstrated scorching 24% revenue growth, raking in $2.1 billion for the same period. To put it into perspective, Amazonโ€™s year-over-year revenue uptick thumped Shopifyโ€™s entire yearโ€™s worth of revenue.

However, Shopifyโ€™s smaller presence supplies a silver bullet for propelling sales growth. The majority of market analysts predict Shopify to sustain over 20% expansion in 2024, approximately twice the rate foreseen for Amazon. As such, the distinction in growth momentum between the two is striking.

Yet a closer examination illuminates a salient distinction in Amazonโ€™s primary sales segments. While its e-commerce division plodded along at below 10% growth, its services arm, constituting 55% of sales, surged by 15% in the last quarter. Ergo, despite the encumbrance of its e-commerce arm, Amazon retains a lucrative growth avenue within the realm of enterprise web services.

Evaluating Profit Trends

Financially, Amazon unequivocally edges out Shopify in this tussle. The e-commerce giant not only boasts robust profitability, with operating income exceeding $37 billion in the last year, dwarfing Shopifyโ€™s $1.4 billion in losses. Amazonโ€™s cash flow trends exhibit an even more impressive trajectory, hinting at substantial profitability upturns in 2024 and beyond.

AMZN Cash from Operations (TTM) Chart

AMZN Cash from Operations (TTM) data by YCharts

The staggering 80%-plus surge in operating cash flow in 2023, propelled by a newfound emphasis on efficiency, could catapult Amazonโ€™s profit margins toward the double digits. Shopify briefly tasted a 12% profitability rate before tumbling into the red in 2022 and 2023. While Shopify is poised to regain profitability this year, whether it can reclaim sustainable double-digit margins in the coming years looms as an uncertainty.

Price and Risk

Consequently, Shopifyโ€™s valuation commands a substantial premium, emblematic of the resounding enthusiasm from Wall Street. A hefty price of 15 times sales is the requisite ticket for a stake in this enterprise, eclipsing Amazonโ€™s modest price-to-sales ratio of 3. Conversely, a stalwart, diversified, and profitable corporation like Microsoft is valued a tad over 13 times revenue. Evidently, this valuation discrepancy inclines many investors toward Amazon as it presents a lower-risk prospect. Moreover, Amazonโ€™s robust cash flows and profits are doubly enticing. While both companies are primed for record-breaking sales and earnings in the years ahead, Amazon presently stands as the more convincing investment opportunity.

Should you invest $1,000 in Amazon right now?

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John Mackey, the erstwhile CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Foolโ€™s board of directors. Demitri Kalogeropoulos has stakes in Amazon and Shopify. The Motley Fool holds positions in and endorses Amazon, Microsoft, and Shopify. The Motley Fool recommends opting for the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool maintains a disclosure policy.

The insights and opinions articulated here are those of the author and may not necessarily mirror those of Nasdaq, Inc.

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