Shopify SHOP has been making noise as a possible Amazon AMZN alternative, and analysts are giving the Canada-based company a fighting chance against the ecommerce giant. Shopify unveiled its “shopper fulfillment network” last week that will allow third party merchants to better compete with Amazon’s delivery times. Analysts received the news of Shopify’s latest endeavor with open arms and the stock spiked 7% last week, adding to an already successful year of growth for the company. Through this latest venture, the company is acquiring new warehouses in various parts in the U.S and Canada. In addition, Shopify is also utilizing AI technology in order to get consumers their goods at a faster and more efficient rate.
Consumer packaged goods is one area where analysts at Rosenblatt believe that Shopify can thrive. This allows a business to take its product directly to the consumer and avoid competition from the likes of Amazon or Walmart WMT. Analysts at the firm went on to say “Consumer packaged brands have long been squeezed on the margin (pun intended) by Amazon and Walmart,” furthering the notion of an underlying opportunity for a business such as Shopify. This untapped facet of the industry could catapult Shopify into a position where it can actually compete with the likes of Amazon for a significant portion of the market.
Additionally, Summit Insights pointed out that Shopify’s new network can also appeal to merchants who are wary of Amazon’s white labeling practices. White labeling is a product or service produced by one company that other companies rebrand to make it appear as if they had made it. The firm commented “Merchants have expressed reservations when doing business on Amazon’s platform including concerns of Amazon white labeling their own product to compete,” displaying the existential precautious sentiment towards the Amazon practice. Summit went on to say that Shopify provides an appealing alternative to Amazon.
Shopify is currently listed at a Zacks Rank #3 (Hold) with a Style Score of A in Growth. Our Zacks Consensus Estimates are currently calling for 100% earnings growth on top of a 42.9% revenue increase for the current quarter. This colossal triple digit earnings growth is expected to continue through the next fiscal quarter and decelerate to double digit growth for the remainder of this year and through the next.
Shopify also has a strong earnings history, boasting an average earnings surprise of 176%. And just last quarter, the company was able to beat our consensus estimate by 280%.
Furthermore, Shopify has been able to leave the broader Computer Software-Services industry in the rear-view mirror, outpacing its peers since 2016.
While Shopify’s growth has been undeniably remarkable, the stock does face some valuation issues. Shopify has a Zacks Style Score of F in Value, as it is currently trading at 546X its forward earnings to go along with a PEG ratio of 23.08. Both metrics are substantially higher than the industry averages. While potential investors will be paying for the stock’s growth up front, Shopify has the potential to sustain its incredible growth if they can continue to create innovative initiatives that can put them into serious competition with the likes of Amazon.
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