Amazon (NASDAQ:AMZN) fired another bullet in what’s shaping up to be an absolute e-commerce battle with Shopify (NYSE:SHOP). What’s still to be determined is how it will affect Amazon stock.
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Amazon quietly acquired Shopify competitor Selz, an Australian company that helps companies sell more of their products online. The sale was announced by Selz in a company blog post in January, but word really didn’t start trickling out until last week.
“We have signed an agreement to be acquired by Amazon and are looking forward to working with them as we continue to build easy-to-use tools for entrepreneurs,” Martin Rushe, CEO and founder of Selz, said in the blog post.
Amazon confirmed the acquisition to CNBC but wouldn’t provide details. We don’t even know the terms of the deal.
But what we do know is Amazon is trying to beat its number one competitor at their own game.
Amazon vs. Shopify
It comes as no surprise that Amazon, with its mammoth $1.6 trillion market capitalization, is the top dog when it comes to retail e-commerce in the United States. It holds the No. 1 position in market share, at nearly 37%.
But at 5.9%, Shopify rings in at No. 2, and it’s growing quickly. The Canadian-based company now employs more than 5,000 people. It offers what it calls a “hassle-free” platform that allows retailers to build their brands and sell their products online.
To date, Shopify has more than 1 million retail partners in 175 countries around the world. It’s grown rapidly in the era of the novel coronavirus, as shoppers shunned brick-and-mortar stores in favor of online sales.
On top of that, Amazon made the decision to prioritize essential items during the pandemic. I think that was the right move, if purely for humanitarian reasons. But the result is that there are a lot of merchants who shifted from Amazon to Shopify to avoid Amazon’s Covid-19 practices.
Obviously, that’s gotten Amazon’s attention.
Amazon previously operated a service called Amazon Webstore that was similar to Shopify. It shuttered the effort in 2015, but obviously Jeff Bezos & Co. still have their eyes on the business. The Wall Street Journal says that Amazon even created an internal team known as Project Santos in response to increased competition from Shopify.
Amazon isn’t saying if the Selz acquisition is part of Project Santos’ work. But it’s really not hard to put two and two together here.
Amazon Stock at a Glance
It’s important to remember that while e-commerce is what Amazon is most known for, it’s only a piece of the bigger puzzle.
Amazon reported fourth-quarter earnings earlier this month. Revenue was a whopping $125.56 billion, beating analysts’ estimates of $119.7 billion.
With a 38% year-over-year increase, Q4 was the biggest in Amazon’s history.
Earnings per share was also a blowout, as Amazon delivered $14.09 per share versus analysts’ expectations of $7.23.
Amazon Web Services, which is the company’s fast-growing cloud computing play, brought in revenue of $12.7 billion. That’s an increase of 28% on a year-over-year basis.
Amazon also issued guidance for Q1 of $100 billion to $106 billion.
AMZN stock performed handsomely during the coronavirus, gaining 76% in 2020. So far this year though it’s been roughly flat.
The Bottom Line
I like both Amazon and Shopify. Both of them are strong companies that are ideally positioned in the e-commerce space.
While Shopify downplays the rivalry with Amazon, it’s really no surprise that Amazon is stepping up its efforts by buying a Shopify competitor. AMZN has historically operated like a startup, even when it surpassed the $1 trillion threshold in market cap.
Amazon stock is flat over the last seven weeks, but I don’t expect that kind of underperformance to continue. Amazon stock has a “B” grade and a buy recommendation in my Portfolio Grader.
On the date of publication, Louis Navellier had a long position in AMZN and SHOP. The InvestorPlace Research Staff member primarily responsible for this article had a long position in AMZN. The staff member did not hold (either directly or indirectly) any other positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.
