The Motley Fool

This Canadian Stock Is the Next Amazon

Image source: Getty Images

Want to invest in the next Amazon (NASDAQ:AMZN)? There’s one Canadian company already on its way.

Over the past five years, Amazon stock has nearly quadrupled. The company I’m talking about, however, saw shares skyrocket by almost 5,000% over the same period.

But the story isn’t over yet. There could another 1,000% in additional upside. This is your chance to get involved.

Understand what makes Amazon great

Few stocks ever achieve $1 trillion valuations. When they do, it pays to understand why.

Amazon’s immense success all ties back to its position as an aggregator.

“When Amazon started, the company followed a traditional retail model, just online. That is, Amazon bought products at wholesale, then sold them to customers,” explained Ben Thompson, founder of Stratechery. “Amazon’s sales proceeded to grow rapidly. This growth allowed Amazon to build out its fulfillment network.”

The secret sauce was created when the company made its infrastructure available to everyone. Suddenly, anyone was a power seller.

“In 2006 Amazon announced Fulfillment by Amazon, wherein 3rd-party merchants could use those fulfillment centers too,” Thompson stressed. “Their products would not only be listed on Amazon.com, they would also be held, packaged, and shipped by Amazon.”

This decision created the e-commerce giant we know today.

When buying on Amazon, shoppers are often unaware of who actually makes the product. All they care about is that their consumption comes on time and as expected. Amazon harnesses the power of millions of merchants from around the world, arming them with storage and fulfillment capabilities that only it has.

“It is all but impossible to beat an aggregator head-on,” Thompson concluded. “The solution instead is to build a platform.”

This stock can truly soar

If Amazon is an aggregator, its biggest competition will come from a platform. No company has a bigger lead than Shopify (TSX:SHOP)(NYSE:SHOP).

But what exactly is the difference between an aggregator and a platform?

“At first glance, Shopify isn’t an Amazon competitor at all: after all, there is nothing to buy on Shopify.com. And yet, there were 218 million people that bought products from Shopify without even knowing the company existed,” Thompson highlighted.

An aggregator brings buyers and sellers together to one place. A platform, meanwhile, brings them together to one technology.

“The difference is that Shopify is a platform,” Thompson said. “Instead of interfacing with customers directly, 820,000 third-party merchants sit on top of Shopify and are responsible for acquiring all of those customers on their own.”

Bottom line

If you’ve purchased from Amazon, you’re likely aware of that fact. But if you’ve purchased through Shopify, you may have no idea. Shopify’s e-commerce platform operates in the background. It’s like the indie version of Amazon.

To be clear, there’s room for both companies to succeed. Positioning them as direct competitors is a bit unfair. Both can attain multi-trillion-dollar valuations based on current digital shopping figures alone, and those numbers will surely rise.

Right now, Shopify is valued at $150 billion. Amazon is valued at 10 times the price. Expect that gap to close in 2021.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Amazon. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Amazon, Shopify, and Shopify and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Fool contributor Ryan Vanzo has no position in any stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.