Forget Uber (NYSE:UBER): Buy Shopify (TSX:SHOP) Instead

Shopify Inc (TSX:SHOP)(NYSE:SHOP) may be a better investment than one of the most talked-about tech stocks on Earth.

| More on:
Online shopping

Image source: Getty Images

In the past month, Uber Technologies (NYSE:UBER) has been getting a significant amount of press, owing to the popularity of the company and the poor performance of its IPO. At one point, the stock was down 10% from its IPO price due to concerns about the long-term stability of its business model. Even though Uber employs a flexible-contract driver model, the company still loses heaps of money quarter after quarter — the most recent loss being $865 million on $3 billion in revenue.

With losses that high as a percentage of revenue, it looks like Uber is a long way from profitability. For many, that puts a major damper on what’s otherwise an exciting and trendy investment. Fortunately, if you want to enjoy some of those sweet tech profits without sinking money into a risky proposition, there’s a stock trading on the TSX that’s growing much faster than Uber, with positive adjusted earnings to boot.

The name of that stock?


Earnings growth

Shopify beats the pants off of Uber in terms of revenue and earnings growth. Whereas Uber’s revenue grew just 24% year over year in its most recent quarter, Shopify cranked out an epic 50% sales surge. In terms of profit, Shopify also ran circles around Uber, with adjusted EPS up 97% year over year, while Uber’s adjusted earnings were negative. For fairness’s sake, it should be mentioned that Shopify is also losing money in GAAP terms, though even on that count, the loss is much smaller than Uber’s.

Market competition

One advantage Shopify has over Uber is that it faces less serious competition. Although there are plenty of e-commerce shopping carts with sizable market share, there are none with substantial investor backing and financial resources like Shopify. Uber, however, competes directly with Lyft, another Silicon Valley darling with a 30% market share.

Path to profits

Shopify has a much clearer path to profitability than Uber does. As mentioned before, it’s already posting positive adjusted earnings. More to the point, however, its GAAP loss is much smaller as a percentage of revenue, sitting at around 1% in the most recent quarter. By contrast, Uber’s Q4 loss was nearly a third of revenue.

Bottom line

For three years now, Shopify has been one of the best-performing stocks on the TSX, rising 950% in the markets and hitting new highs almost on a daily basis. It’s not hard to see why. With revenue growth consistently in the high double digits and GAAP losses growing ever smaller, it’s only a matter of time before this company becomes a profit-pumping machine. Compared to Uber, whose path to profits is much less clear, Shopify is a great value with tons of upside. If you must pick just one of these two, there’s no doubt that Shopify is it.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Shopify and Shopify. Shopify is a recommendation of Stock Advisor Canada.

More on Tech Stocks

Businessman holding AI cloud
Tech Stocks

Artificial Intelligence, Real Returns: Profiting From the AI Revolution

Tech companies like Shopify Inc (TSX:SHOP) are profiting from the AI revolution.

Read more »

Overhead shot of young adults using technology at a table
Tech Stocks

1 Canadian Tech Stock I’d Buy Before Shopify Stock

Shopify (TSX:SHOP) has done wonderful this year, but it might be time for other tech stocks like this one to…

Read more »

Retirement plan
Tech Stocks

Want $1 Million in Retirement? Invest $50,000 in These 2 Stocks and Wait a Decade 

Investing to earn $1 million in a decade requires high-growth stocks. If you are willing to take risk, these stocks…

Read more »

growing plant shoots on stacked coins
Tech Stocks

Can Shopify’s Impressive Growth Be Paired With Future Dividend Payouts?

Shopify Inc. (TSX:SHOP) has never paid a dividend. Can it afford to do so?

Read more »

financial freedom sign
Tech Stocks

I’d Aim for $1 Million Buying Just These 2 TSX Stocks

Growth investors shouldn’t be shy about loading up on these two top tech stocks today.

Read more »

bulb idea thinking
Tech Stocks

Why Now Is the Time to Buy Lightspeed Stock in Bulk

Buy Lightspeed stock in bulk to gain from the steep recovery in its price.

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

Got $1,000? 3 Top Canadian Stocks to Buy in December

Given their high growth prospects and attractive valuations, these three growth stocks could deliver superior returns over the next three…

Read more »

Businessman holding AI cloud
Tech Stocks

1 AI Stock I’d Buy Over Nvidia for 2024

Nvidia (NASDAQ:NVDA) stock isn't the only AI play to put atop your shopping list this December.

Read more »