There are many similarities between Shopify (SHOP 1.61%) and Amazon (AMZN 0.75%). They're both e-commerce superstars that excel at their unique businesses and lead the industry. They've both minted many millionaires and remain popular with investors.
Shopify is the newer, shiner stock, and it's gained almost 3,000% since its initial public offering. Amazon has increased about 730% at the same time, but it's gained a whopping 184,000% since going public, a figure so large it's hard to contemplate.
Newer isn't necessarily better. Amazon stock has outpaced Shopify over the past year and is up 19% so far in 2024 while Shopify stock has remained flat year to date. Shopify could still have lots of potential, but Amazon is a reliable winner with plenty of opportunity.
The world is Amazon's oyster
Amazon is the leader in two of the biggest and fastest-growing industries in the world, e-commerce and cloud computing. E-commerce is growing as a percentage of retail sales, and Amazon benefits from that more than any other company on the planet, because it's responsible for almost 40% of all U.S. e-commerce sales. It's solidifying its lead and making sure no one else can get anywhere close by speeding up deliveries and offering more products than available anywhere else, making it the retailer of choice for its hundreds of millions of Prime members.
E-commerce remains its core business and brings in more revenue than its other segments. But Amazon Web Services (AWS) is equally important for two reasons: It contributes more than half of operating income despite only accounting for a mid-teens percentage of revenue (14% in the fourth quarter), and it has a massive market opportunity. It had been growing much faster than the overall business, but sales growth has decelerated as clients shrink spend in the inflationary environment. Management sees this beginning to change, and it has been making new deals with large clients like Merck and Hyundai.
Amazon is using artificial intelligence (AI) in all of its businesses, but the potential for generative AI for AWS is enormous. Amazon is a leader in the field and it offers an increasing and competitive array of tools that could be game changers for clients. For example, hospitality company Accor S.A. created a generative AI travel assistant using Amazon Bedrock and Amazon SageMaker to boost bookings while reducing call volume.
Expect the unexpected
Amazon pops up in the most and least expected places. It has expanded its Buy With Prime service to third parties that can leverage Amazon's payment and logistics networks through their own web presence, and it's delivering more shipments with drones.
With its acquisition of MGM Studios, Amazon beefed up its streaming services and now releases full-feature films in theaters. That has added thousands of titles to its content library, and also joined the ad-free and ad-supported streaming model like the other major premium streaming networks.
Amazon is going all out in its healthcare business, which it expanded when it acquired One Medical last year. Prime members can add One Medical access to their memberships for $9 per month or $99 annually, plus $6 monthly for each additional family member. CEO Andy Jassy said "it's still early days," but he sees the opportunity to be a part of a revolution in healthcare in many ways, including wellness and diet.
Amazon's advertising business has emerged as its fastest growing segment, and it has incredible growth potential. Amazon released generative AI tools for advertisers to create lifestyle images to boost engagement and conversions, and unlike its competition, it offers a broad range of advertising mediums including its unmatched shopping site and its ad-supported streaming tier.
What will Amazon come up with next? Where it is right now, the opportunities look almost endless. And Amazon isn't likely to stop here. Amazon stock is up 77% over the past year, and it could mint more millionaires as it dominates its industries and keeps climbing.
