Services

Why Shopify Earnings Should Overshadow Amazon's Earnings

Chris Lange

Published: July 10, 2020 10:29 am

Last Updated: July 10, 2020 10:31 am

Shopify Inc. (NYSE: SHOP) and Amazon.com Inc. (NASDAQ: AMZN) each have seen massive runs during the pandemic, but by the looks of it, Shopify could overshadow Amazon when it comes to earnings. The trend of e-commerce has been undeniable, and these two have been the biggest winners as a result.

Shopify stock is up about 161% year to date, while Amazon stock is up closer to 72%. Many break this down into a growth versus value argument to explain why Shopify is ahead in this matchup.

Shopify has claimed the title of the most valuable company in Canada on a market cap basis, with a total addressable capitalization of roughly $123 billion. However, Amazon ranks number three in the world by this metric, with a market cap of $1.58 trillion, more than 10 times that of Shopify.

What analysts seem to be asking themselves now is how much more these stocks will run and how much is already priced in. Despite these massive runs, analysts find themselves only chasing these stocks higher.

One valuation question that analysts are facing is where Shopify’s revenues will be in 2025. Right now, analysts are calling for revenues of $2.17 billion and $2.92 billion for the 2020 and 2021 full years, respectively. Based on the 2021 estimate, analysts have a price to sales multiple of 42.

For comparison, analysts are calling for Amazon revenues of $346.85 billion and $408.17 billion for the 2020 and 2021 full years. Considering this, Amazon has a price to sales multiple of 3.8, using 2021 estimates.

The difference in multiples comes back to the growth versus value argument, and by the looks of it, Shopify still has a lot of room to grow.

Looking ahead to the earnings reports, note that Amazon is set to report on July 23 and Shopify will post results on July 29. (Also note that these dates are not set in stone).

For Amazon, analysts anticipate $1.34 in earnings per share (EPS) and $80.68 billion in revenue for the quarter. The same period of last year reportedly had $5.22 in EPS and $63.4 billion.

For Shopify, the consensus forecast sees a net loss of $0.02 per share on $502.85 million in revenue. In the second quarter of last year, it posted EPS of $0.10 ion $361.98 million in revenue.

The question of which e-commerce empire will have the better earnings report is up in the air for this quarter. If the past is any indication of what to expect, investors have to be betting on Shopify. Also, Amazon’s most recent report saw a mixed reaction as the company had solid earnings but said that it would be reinvesting $500 million as a “thank you” bonus to the workforce and $4 billion for safety measures against COVID-19.

It’s also worth pointing out that even within the past two months, Shopify announced a secondary offering of 1.85 million shares and the stock did not even blink. This was when shares were valued around $700 apiece, and they have gained about 50% since then.

Shopify stock traded down about 1% on Friday at $1,030.15, within a 52-week range of $282.08 to $1,059.44. The consensus price target is $793.01.

Amazon stock traded at $3,186.00, in a 52-week range of $1,626.03 to $3,215.00. The consensus analyst target is $2,834.00.