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eMarketer expects that Amazon (AMZN) accounts for nearly half of the total US e-retail market in 2019. However, the search agency does not have a market share. did not include Shopify (SHOP) among the actors that should be in the top 10 US. online retail market. Despite this, the company is currently presented as a major competition for Amazon. The stock of Amazon has increased by 21.93% since the beginning of the year and Shopify by 159.06% since the beginning of the year.
How Shopify intensifies its offensive
On September 10, Shopify announced its intention to acquire 6 River Systems robotic processing company for $ 450 million. The company expects the transaction to be completed in the fourth quarter. Shopify does not expect any revenue impact from this transaction in 2019. However, it anticipates additional expenses of $ 25.0 million in 2019. The company also expects River Systems to generate $ 30 million in 2020.
This acquisition could be part of Shopify's plan to invest $ 1.0 billion in strengthening its distribution network in the United States. The acquisition of 6 River Systems could allow it to compete directly with Amazon Robotics in the US e-commerce space.
Shopify made its presence felt in 2019
Analysts and investors began to take note of Shopify as a potential competitor to Amazon after the release of its fourth quarter results in February. Boasting strong performance in all of its businesses, Shopify outperformed both its non-GAAP (generally accepted accounting principles) revenue and estimates. The stock continued to grow after the release of its first quarter results in April. During the quarter, it exceeded $ 10.37 million in consensus revenue and $ 0.14 in non-GAAP earnings per share estimates.
In May, Shopify acquired Handshake, a company involved in facilitating B2B wholesale purchases (business-to-business). This decision reflects the company's growing interest in US business-to-business e-commerce. In June, the company announced its entry into the physical distribution space of the US e-commerce sector by launching an extensive distribution network. To learn more, read The war between Shopify and Amazon in ecommerce is heating up.
Amazon aggressively strengthens its e-commerce business
On September 9, CNBC announced plans to add 30,000 full-time and part-time jobs in its corporate, technology and customer management departments. According to MWPVL International, as of September, Amazon had 971 installations around the world. Of these, 426 are in the United States. Facilities include distribution centers, additional centers, return centers, Pantry / Fresh distribution centers, Prime Now Hubs, airport hubs, delivery stations, inbound and outbound sorting centers, and Whole Foods retail grocery delivery centers.
In June, Amazon announced plans to expand its air cargo network by hiring new Boeing 737-800s. The company plans to operate 70 cargo planes by 2021 here. Read Amazon has just added 15 more planes to Amazon Air to find out more.
Amazon's switch from two-day to one-day shipping for Amazon Prime members is already attracting significant interest from analysts and investors. To learn more, read the Amazon One-Day Delivery: What You Need to Know.
On September 5, CNBC announced that Amazon was testing a new feature to help customers identify new products launched. The company is also evaluating another feature, the Top Brand badge, to help customers identify established brand products. The badges should enhance the overall shopping experience of the customers.
What are analysts saying about Amazon and Shopify
Analysts are closely monitoring the e-commerce activities of Amazon and Shopify. On September 3, RBC Capital Markets reiterated its "outperformance" rating on Amazon and raised its target price from $ 2,200 to $ 2,600. It attributes this increase to the expected commercial success of the company's one-day delivery option. Read Amazon Stock up while RBC raises its price target for more information.
On September 9, CNBC announced that R. W. Baird was raising the Shopify target price from $ 370 to $ 410. The analyst expects the company to become the second-largest online commerce player in North America in terms of sales volume. The analyst also expects more than a million merchants to use the Shopify platform by the end of 2019. In such a scenario, Shopify will replace eBay and will be a competition. much brighter for Amazon.
On August 27, Mark Zgutowicz, an analyst at Rosenblatt, reiterated his "buy" rating on Shopify and raised his target price from $ 410 to $ 481. He attributed this increase to the expected revenue stream from Shopify Fulfillment Network.
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