Shopify (SHOP -5.41%) and BigCommerce (BIGC -2.65%) both help merchants set up online stores, process payments, and fulfill orders. Their cloud-based services are attractive options for smaller retailers that don't want to join a big third-party marketplace like Amazon.

But Shopify and BigCommerce both lost more than 70% of their value this year as they faced the post-pandemic slowdown in online sales, inflationary headwinds, and other macro challenges related to higher interest rates. Should investors consider buying either out-of-favor e-commerce stock as a turnaround play? 

An online merchant organizes orders on a laptop.

Image source: Getty Images.

The key differences between Shopify and BigCommerce

Shopify is based in Ottawa, Ontario, and is one of Canada's largest tech companies. It serves more than 1.75 million merchants worldwide, it's used by nearly 30% of e-commerce websites in the U.S. (according to cloud-hosting site Kinsta), and its brand has largely become synonymous with do-it-yourself e-commerce services.

BigCommerce, which is based in Austin, Texas, is a lot smaller than Shopify. It only serves about 60,000 merchants, and its total revenue in 2021 would have accounted for less than 5% of Shopify's top line. It's an underdog platform that doesn't even rank among the largest e-commerce platforms in the United States.

Shopify and BigCommerce both provide a wide range of monthly subscriptions for small to large businesses. The subscription prices for their online services are comparable at about $30 to $300 each month.

The underdog is growing faster than the market leader

At first glance, it might make more sense to invest in the market leader than the distant underdog, especially in the e-commerce sector, which usually favors larger companies with superior scale. But it's sometimes smarter to invest in the underdog if it's growing faster than the market leader.

In 2019 and 2020, Shopify grew much faster than BigCommerce. But in 2021, Shopify's sales growth decelerated while BigCommerce's growth continued to accelerate. And in the first nine months of 2022, BigCommerce actually grew faster than Shopify:





First Nine Months of 2022

Shopify revenue

$1.58 billion

$2.93 billion

$4.61 billion

$3.87 billion

Growth (YOY)





BigCommerce revenue

$112 million

$152 million

$220 million

$207 million

Growth (YOY)





Data source: Company earnings reports. YOY = Year over year.

Shopify struggled as inflation curbed discretionary spending, smaller retailers grappled with the impact of Apple's iOS update on targeted ads, and the strong U.S. dollar reduced the platform's overseas revenue. Analysts now expect Shopify's revenue to rise 20% for the full year.

BigCommerce also faced the same headwinds in the lower-end market, but it offset some of that pressure by gaining more enterprise customers, which accounted for 71% of its annual recurring revenue (ARR) at the end of the third quarter. It expects that percentage to eventually exceed 80% over the long term. For the full year, analysts expect BigCommerce's revenue to grow 27%.

But the net losses and leverage tell a different story

BigCommerce might be growing a bit faster than Shopify, but it's still deeply unprofitable. Its net loss narrowed from $43 million in 2019 to $38 million in 2020, but widened to $77 milion in 2021. It posted an even wider net loss of $107 million in the first nine months of 2022. The company attributes those losses to a combination of its ongoing investments in its enterprise platforms, higher marketing costs, and occasional sales promotions to attract new merchants.

BigCommerce ended its latest quarter with just $308 million in cash, cash equivalents, and marketable securities. Its high debt-to-equity ratio of 6.4 doesn't give it much room to raise fresh cash at reasonable rates.

Shopify was unprofitable up to 2019. But it generated a net profit of $320 million in 2020, which surged to $2.91 billion in 2021. But in the first nine months of 2022, it posted a net loss of $2.84 billion as it integrated several acquisitions and expanded its logistics network. That mix of higher spending and slowing revenue growth spooked the bulls.

Shopify ended the third quarter with $4.9 billion in cash, cash equivalents, and marketable securities. Its debt-to-equity ratio came in at just 0.2. That superior liquidity and lower leverage might make Shopify a lot more appealing than BigCommerce as interest rates continue to rise.

The valuations and verdict

Shopify's enterprise value (EV) of $45 billion puts the e-commerce leader at seven times next year's sales. BigCommerce's EV of about $700 million values it at just two times next year's sales. BigCommerce might seem cheaper than Shopify, but it's also smaller, and its balance sheet is a lot messier. As the bear market drags on and the economy teeters on the brink of a recession, investors will likely favor the market leaders with stronger balance sheets over the underdogs.

I wouldn't rush to buy either of these e-commerce stocks right now. But if I had to choose one over the other, I'd pick Shopify because it has a clearer path toward long-term growth than BigCommerce, which needs to expand a lot faster to break out of its niche and prove that its business model is sustainable.