This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Amazon (NASDAQ: AMZN) and Shopify (NYSE: SHOP) are leading players in the online-retail industry, and both companies have also seen substantial share price declines across 2022's turbulent trading. Which of these e-commerce stocks is the better buy at today's prices? Read on to see why two Motley Fool contributors disagree on which company you should put your money behind. 

Amazon has incredible competitive advantages

Parkev Tatevosian: Amazon has expanded from a tiny online book retailer to the everything store it is today. The company has made this leap with its focus on the customer experience. With every step in its progress, Amazon has worked to improve the customer value proposition. 

This wasn't an easy task. It required years of experience and billions of dollars of investments in warehouses, logistics, web servers, and more. The effectiveness of those capital investments has helped Amazon grow from $107 billion in sales in 2015 to $470 billion in 2021. 

Moreover, the massive capital investment makes it difficult for any competitor to encroach on its business. Amazon can offer free two-day shipping to Prime members for millions of items on its platform, and even next-day shipping in select cities. When people consider buying something online, the delivery window is a significant selling point. Therefore, Amazon's lead in this arena is a competitive advantage that could serve it well for years.

As Amazon's revenue grows, it leverages its fixed costs across a broader sales base. In other words, Amazon's business model demonstrates economies of scale. Between 2015 and 2021, Amazon's operating profit margin grew from 2.1% to 5.3%.  

Of course, Amazon faces headwinds in the near term as consumers decrease online spending and look to spend money on away-from-home experiences they missed out on during the earlier stages of the pandemic. However, online spending as a percentage of overall spending is forecast to continue rising over the next several years.

That longer-run trend is unlikely to reverse because of the fundamental advantages e-commerce offers. Amazon, the largest e-commerce retailer, benefits from that trend.

Shopify's beaten-down stock has huge potential upside

Keith Noonan: Amazon's massive scale and infrastructure advantages probably make it more protected from competition compared to Shopify and its merchant-platform services model. The tech giant's hugely successful cloud services business also looks poised for more strong growth over the long term. I wouldn't have any qualms with anyone stating that Amazon is the better company, but I also think there's a strong case that Shopify is the better stock and offers a more attractive risk-reward profile at current prices. 

Shopify has admittedly seen growth slow dramatically as it's lapped periods of blockbuster performance and seen pandemic-related demand tailwinds recede. After posting 57% year-over-year sales growth in the second quarter of 2021, Shopify's Q2 revenue growth came in at just 16% this year.

Despite the substantial deceleration, the company still has plenty of room for long-term sales and earnings expansion as it attracts new merchant partners, paves the way for increased spending from those already using its services, and builds out supply chain management and fulfillment services that increase the value of its platform.

Shopify's share price is down roughly 78% year to date and 83% from the lifetime high that it hit last November, and the big sell-off has presented an attractive buying opportunity. 

SHOP data by YCharts

Amazon stock has been punished in response to bearish shifts in the broader market and slowdown sin the e-commerce space as well, and I expect that it will eventually bounce back and go on to reach new highs.

Still, Shopify's pullback looks even more overdone. The company's market capitalization of roughly $38 billion also represents just a small fraction of Amazon's $1.3 trillion valuation, and the size difference suggests the smaller company could have an easier time moving the needle and delivering big gains for shareholders. 

So which of these e-commerce companies is the better buy?

If you're bullish on the long-term outlook for the e-commerce space, investing in both Amazon and Shopify could be the best play. Both companies are leaders in their respective service categories, and both companies are on track to play important roles in driving the growth of the overall online retail market. 

If you're only interested in owning one of these stocks, go with the one that best suits your risk tolerance and portfolio goals. While both companies have growth-dependent valuations, Amazon's business is larger, sturdier, and significantly more profitable thanks to its cloud services segment. But for those investors who see promise in Shopify's business and are willing to take on more risk, the smaller e-commerce player may have the potential to deliver superior returns. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Better buy: Shopify vs. Amazon stock appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Noonan has no position in any of the stocks mentioned. Parkev Tatevosian has positions in Shopify. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Shopify. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN) are two of the most influential technology companies in the world. On the heels of turbulence for the market, and growth stocks in particular this year, each company's valuation is also down significantly from its previous high.

With these industry leaders potentially on track for big rebounds, investors could wonder which stock looks like the better buy at today's prices. Read on to see why two Motley Fool contributors have different views on which company will be a better performer for your portfolio.

The case for Amazon

Keith Noonan: When it comes to innovation, Amazon has an absolutely incredible track record. The company built an online bookstore into the leading overall online retail platform, and it continues to shape the direction of the e-commerce world. The tech giant also spearheaded the evolution of cloud-infrastructure services with Amazon Web Services, and the technologies it provides are at the heart of the modern internet and the evolution of cloud-based software.

Amazon also has a fast-growing digital advertising business that has plenty of room for long-term expansion. Because the company controls the leading online-retail marketplace, it has some natural advantages in the ads space, and it's still in the early stages of leveraging these strengths to build on its position in the category.

The company is also a leader in smart speakers and voice-based operating systems, and its move to acquire iRobot should bolster its position in the consumer devices category and augment broader strategic initiatives. Between its various products and services for consumers and businesses, Amazon has access to an incredible amount of data, and this should help the company take advantage of opportunities in artificial intelligence and continue mapping out new growth strategies and ways to capitalize on synergies between its businesses.

Amazon's cloud segment is highly profitable and continues to grow at an impressive clip, and advancements in automation and robotics could ultimately make its market-leading e-commerce business much more profitable. With big opportunities in its two core businesses, growth potential in other categories, and a penchant for market-defining innovation, Amazon looks like a great buy today.

The case for Alphabet

Parkev Tatevosian: The factors that help make Alphabet an excellent stock to buy are that it holds a dominant position in a massive industry and sells at a relatively inexpensive valuation. Indeed, Alphabet is home to Google, the most powerful search engine worldwide. That's a critically important business to dominate because so many purchase decisions start with an internet search.

It can partly explain how Alphabet has expanded its revenue from $46 billion in 2012 to $258 billion in 2021. More importantly, it helped boost operating income from $13.8 billion to $78.7 billion in that same time. Businesses with less dominant positions frequently grapple with competitors, which works toward lower profits. Alphabet's search engine makes money through advertising. Companies pay Alphabet to have their websites listed near the top of search engine queries.

It's estimated that advertisers will spend $838 billion globally in 2022, an 8.4% increase from the year before. That massive figure allowed Alphabet to expand beyond its $258 billion revenue in 2021. If it operated in a smaller market, it could approach a ceiling much faster, making an investment less lucrative.

GOOG Price to Free Cash Flow data by YCharts.

Despite these excellent prospects, Alphabet is trading relatively inexpensively at a price-to-free-cash-flow ratio of 25.6 and a price-to-earnings ratio of 22.8. These are below its historical averages through the last five years.

Which big tech stock should you buy today?

Unless you're only interested in owning one of these big tech companies in your portfolio, this is a case where buying both stocks could be the right move. Alphabet's top positions in search, digital advertising, and mobile give it clear avenues to long-term expansion. Meanwhile, Amazon's market-leading e-commerce and cloud computing businesses give it a strong growth engine, and the company has proven it can successfully branch into new categories. Both of these technology leaders look poised to tap into secular growth trends, and each stock stands a good chance of being a long-term winner.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Better buy stock: Alphabet vs. Amazon appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keith Noonan has no position in any of the stocks mentioned. Parkev Tatevosian has positions in Alphabet (C shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

In today's volatile market, it's not hard to find growth stocks that trade at huge discounts compared to their highs. Amazon (NASDAQ: AMZN) and Netflix (NASDAQ: NFLX) are two FAANG stocks trading far below peak levels, and investors might be wondering which former highflier is the better buy. Read on to see where two Motley Fool contributors come down on this tech stock valuation debate. 

Netflix is the streaming content trailblazer

Parkev Tatevosian: Netflix has pioneered a new form of content consumption through streaming. The company boasted 222 million subscribers as of March 31. Much has been made about its slowdown in subscriber growth. Netflix shed 200,000 subscriptions in its most recently completed quarter and is forecasting a loss of two million more in the current quarter. The market didn't respond well to these latest numbers and accelerated the stock sell-off. However, investors have arguably overreacted to the bad news.

NFLX PE Ratio data by YCharts.

Netflix stock is trading at a price-to-earnings (P/E) ratio of 16.9, which is the lowest in the last five years. Meanwhile, it was expected that growth would slow following the surge in subscriber additions at the onset of the pandemic that pulled a lot of growth forward. The economic reopening has created more options for what people can do with their time, and after being cooped up at home for more than a year, it's understandable that they want to get out of the house and use less Netflix. 

That change of pace by users should not be mistaken for a structural decrease in demand for Netflix's services. For less than $20 per month, a family can get entertainment that can be accessed anywhere they can take a mobile device or have internet access. That excellent customer value proposition will likely fuel growth for several more years. 

At Netflix's scale, it was already good enough to deliver revenue of $29.7 billion and operating income of $6.2 billion in 2021. It has foundational economies of scale that rapidly expand profits with incremental revenue growth. That's because it will cost Netflix roughly the same to show its content to 500 million subscribers as it does to 200 million.

Amazon is built for growth thanks to strong moats 

Keith Noonan: Amazon stock has fallen roughly 30% year to date and 39% from its lifetime high. With the company valued at roughly 2.3 times this year's expected sales and 143 times expected earnings, it still has a much more growth-dependent valuation than Netflix. However, I also think it stands out as a better buy for long-term investors.

With fuel and other shipping and logistics costs rising, Amazon's e-commerce business is facing some major headwinds at the moment. Coupled with big investments in online-retail infrastructure and technology spending, current conditions are creating significant setbacks for profitability right now.

However, Amazon Web Services continues to account for a greater portion of the company's overall sales profile, and the business has a strong industry position and a fantastic net income margin. Despite rising expenses, Amazon's e-commerce and cloud infrastructure segments look incredibly well-positioned for long-term growth, and competitors will have great difficulty disrupting the company's dominant positions in these spheres. 

Meanwhile, Netflix carries a lot of debt, and it looks like the business model that was formerly so successful for the company is no longer capable of delivering the kind of performance investors are looking for. While the streaming leader has undeniably created some big hits, it also seems to have pursued a quantity-over-quality approach to building out its library, and its content has lost some luster now that competitors are rapidly finding their footing in the streaming space. I wouldn't be shocked to see Netflix stock bounce back from recent pricing lows, but the business doesn't strike me as special anymore.

So which is the better buy?

When it comes to deciding between Amazon and Netflix, investors should probably start by deciding which business they think looks stronger and then balancing that assessment against growth expectations and valuation levels. If you're looking for a more value-oriented stock with a less growth-dependent valuation, Netflix may prove to be the better buy. However, if you're more concerned about long-term moats and market positioning, Amazon might be a better fit.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Better bear market buy: Netflix vs Amazon appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Should I buy the iShares Global 100 ETF (IOO) now?
• These are the 10 richest people in the world in September

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. . Keith Noonan has no position in any of the stocks mentioned. Parkev Tatevosian has positions in Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Netflix. The Motley Fool Australia has recommended Amazon and Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.