Canadian e-commerce platform Shopify has seen a considerable dip in stock prices since the beginning of 2022, down more than 68 per cent from $1,552.23 in January. In November 2021, Shopify stock prices peaked at $2,139.82.

Retail therapy: Which stock should tempt investors more, a Shopify coming out of a slump and giving its CEO more power, or mighty Amazon?

Valuation comes down to earth as CEO gains power

Shopify Inc. shareholders voted this week to change the company’s governance structure and give the company’s chief executive officer control of a plurality of Shopify’s voting power.

On Tuesday, 53.7 per cent of shareholders voted at the company’s annual general meeting to give CEO Tobias Lütke — as well as his family and affiliates — 40 per cent of the company’s voting power as long as he is heading the company or directly involved with Shopify as a consultant or board member. Also approved was a 10-for-one split of Shopify’s Class A and Class B shares.

The Canadian e-commerce platform has seen a considerable dip in stock prices since the beginning of 2022, down more than 68 per cent from $1,552.23 in January. In November 2021, Shopify stock prices peaked at $2,139.82. The company reported its revenue grew 22 per cent to $1.2 billion in the first quarter of 2022.

This lower value is likely more in line with Shopify’s actual valuation, said Dan Romanoff, a senior equity analyst with Morningstar. At the peak of Shopify’s trading last year, Romanoff said his fair value estimate of the company’s stock prices was less than half of its value, at around $800 (U.S.).

“I think that Shopify is trading, quite frankly, more around where it should be now,” he told the Star. The company’s stock ballooned over the pandemic, but with values now levelled out, Romanoff said investors could see an approximately 30 per cent upside to purchasing stock with Shopify.

Seasoned tech pillar weathers the storm

As is the case with other tech and software companies, stock prices at e-commerce giant Inc. were on the decline beginning in early April, hitting a low of $104.10 (U.S.) on May 24. But prices have recently levelled out, and there are signs that the big box online retailer is recovering from its steep springtime drop.

Like its Canadian counterpart, Amazon also implemented its own stock split — 20-for-1 in its case — which took effect at the end of trading June 3.

Romanoff said that unlike Shopify, Amazon has been tested in different market cycles — especially when it comes to e-commerce. The company also benefits from the performance of its cloud computing platform AWS and its advertising business, he added.

AWS and advertising are a business driver for Amazon, Romanoff said. “They sort of accelerated and coming out of COVID they haven’t slowed down at all, those businesses are still doing remarkably well.” In its first quarter results, Amazon reported AWS has grown 37 per cent year-over-year. Net sales, meanwhile, increased seven per cent to $116.4 billion (U.S.).

During the spring tech stock dip, Amazon was down roughly 35 per cent compared to Shopify’s approximately 75 per cent decrease, Romanoff said. Meanwhile, the company’s stock has been stable for about five weeks, showing “durability,” he said.

The bottom line

Amazon has seen more ebbs and flows in the market based on its long life compared to relative-newcomer Shopify. AWS and advertising dollars represent a long term “secular driver” for the company, Romanoff said, while also producing high margins. “None of those properties really apply to Shopify. So for those reasons, I would say Amazon would be my pick between the two of them,” he said.

With files from The Canadian Press

Jenna Moon is a Toronto-based business reporter, focused on personal finance and affordability. Follow her on Twitter: @_jennamoon


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