Will Shopify's market value surpass Amazon in ten years?

As an independent website building tool , Shopify allows companies to build online stores , process payments , ship orders , and conduct marketing activities without relying on market trading platforms like Amazon .

Shopify's "decentralized strategy" has enabled it to grow faster than Amazon in the past few years .

Between 2015 and 2020, Shopify 's compound annual growth rate (CAGR) reached 70.2%, while Amazon 's CAGR during the same period was 29.3% .

Shopify 's stock has soared 4,460% over the past five years , while Amazon's has only risen nearly 400% .   A market cap of $ 182 billion is still less than one-tenth of Amazon's $1.86 trillion.

But , 10 years from now , can Shopify 's market value catch up with or even surpass Amazon ?

Shopify has great development prospects

Shopify currently serves more than 1.7 million businesses worldwide , a tenfold increase from the first quarter of 2015 .

But this huge growth rate is just the beginning. Last June, Piper Sandler analyst Brent Bracelin estimated that Shopify merchants only accounted for 2% of the e-commerce market .

Bracelin pointed out that if the penetration rate of e-commerce increases from the current 15% to 50% in the next decade , Shopify's annual revenue will quadruple from now - from US$2.93 billion in 2020 to US$12 billion in 2025 .

While Shopify primarily serves small and medium-sized businesses, it now serves a growing number of larger enterprise customers through its Shopify Plus platform.

Last year, Walmart integrated its third-party online marketplace with Shopify's services . I believe that more companies will choose Shopify's services like Walmart , which will be a huge boost to Shopify.

Can Shopify catch up and surpass Amazon?

Amazon's market share growth was driven by the expansion of its e-commerce ecosystem , such as overseas platform expansion, acquisition of physical stores (such as Whole Foods), and acquisition of smaller online marketplaces . It was also driven by the growth of the global cloud infrastructure platform market , where Amazon Web Services (AWS) still leads by a large margin .

Image source: macrotrends.net

If Amazon 's revenue grows 25% per year over the next five years, it will have revenue of $1.18 trillion in 2025. If its growth slows to 20% over the next five years , its revenue will reach $2.93 trillion in 2030 .

Assuming Amazon's stock continues to trade at four to five times its annual revenue, the company could be worth more than $13 trillion by 2030. That forecast may be too optimistic because it doesn't take into account the impact of recessions , antitrust regulations , and other unforeseen factors . But a 22.5% compound annual growth rate shouldn't be a problem for Amazon over the next decade .

Assuming that Shopify can generate $12 billion in annual revenue in 2025, its compound annual growth rate will reach 32.6% . If this growth rate is maintained over the next five years, it could generate nearly $50 billion in revenue in 2030. With the rise in global e-commerce penetration , it is not unrealistic for Shopify to achieve this kind of growth.

Shopify currently trades at 60 times last year's sales and 40 times this year 's sales . Assuming its price-to-sales ratio drops to 30 times, it would be worth $1.5 trillion by 2030 .

Image source: Ycharts

What can we see beyond market capitalization?

Maybe 10 years later, Shopify's market value will still be lower than Amazon's, but that doesn't mean it's not worth investing in . In the foreseeable future, Shopify may still show a stronger growth trend than Amazon. For a young company founded in 2006 , breaking the $1 trillion mark in the next decade is a remarkable achievement , and it will become Canada's first trillion-dollar company.

The past decade has shown that Shopify's "decentralized strategy" is as competitive as Amazon's "centralized strategy" . We don't know who is better, but it is this diversification that has driven the prosperity of the e-commerce industry.

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