Shopify Vs eBay Stock: Which Is Best?

Shopify Inc (NYSE:SHOP) has been trading at historic levels in recent quarters after nearly tripling in price in the pandemic’s wake.

But it’s not the only ecommerce giant in the mix – eBay Inc (NASDAQ:EBAY) is a $40-billion+ company that’s been around as long as Amazon (AMZN). It also saw big gains from the pandemic, as people pushed to save money by supporting the secondary market.

So, which is the better investment between Shopify vs eBay stock?

Each ecommerce play is exciting and gives everyone from solopreneurs to major enterprises access to a sales platforms, but they differ significantly in their respective approaches.

Although eBay has been around over a decade longer, it’s about a third the size of its larger rival. And that’s the first clue that Shopify might be riding a more scalable business model than eBay.

They both have millions of sellers generating billions of dollars in revenue, but which has the best growth prospects?

The Bull Case for Shopify

Shopify is an all-in-one, out-the-box ecommerce solution for merchants. Businesses can create their own websites and compete on the greater internet instead of being limited to eBay’s on-platform search. This helps fuel sales for stores of all sizes around the world selling a wide range of products across the gamut of product sectors.

What’s most appealing about the platform is the ability to get up-and-running for as low as $9 per month and no web development experience.

It also has a robust third-party partner and developer ecosystem that supports on-platform businesses. This makes it easier than ever to launch an online business and grow it into a revenue-generating business.

But that doesn’t mean it’s free of shortcomings – Shopify faces stiff competition from a variety of sources looking to accomplish the same thing. WooCommerce, Opencart, and even WordPress are trying to attract the same customers.

Where Shopify Falls Short

Although it’s a great out-the-box solution, Shopify is less intuitive than some of its rivals when your business starts to scale. As your business grows, you’ll find yourself spending more and more monthly fees to add on to your subscription costs.

While it has a lot of functionality, you typically have to buy it, and there’s not as much capability as you’ll find in other options. And it’s a massive pain to migrate away from Shopify once you select it. This can be a turnoff for some businesses.

From a Shopify investor perspective, this “stickiness” enhances customer lifetime value. Businesses face a tough hurdle to transition all transaction and customer data elsewhere, let alone build a new storefront with all the various moving parts: CRM, payment integration, reporting, and so on.

It’s also regarded as having a lackluster content management system, which is important because blog content is a key to successful digital marketing for many businesses. Many businesses need blogs to increase your search-engine optimization (SEO) rankings and overall web visibility.

This is why some analysts prefer eBay.

Why Buy eBay Stock?

Ebay was a darling of the 1990s tech boom, but it never reached the astronomical heights enjoyed by competitors like Amazon (AMZN). And it even got overshadowed by its former subsidiary PayPal (NASDAQ:PYPL), which is now one of the most valuable Fintech companies.

However, the eBay still manages to stay competitive, and major retailers like Best Buy use it to stay visible against the backdrop of the Amazon threat.

The spinout of PayPal coincided with a push from eBay to strengthen its Managed Payments platform. This is expanding the use-cases, especially internationally. And the company is growing revenue, increasing 19 percent year-over-year in the first pandemic year.

This led the company to $855 million in free cash generated during the most recent quarter, which was a 65 percent increase from the same period of the prior year. It also pays a respectable 1.24 percent annual dividend yield, which makes it an attractive investment for those seeking liquidity.

And the marketplace fuels active third-party development. Power sellers have a lot of options for eBay tools, and the off-platform development ecosystem powers it to higher heights. This is bringing bigger numbers to its user count and top line sales.

However, there’s still risk to choosing eBay over Shopify.

Risks of Buying eBay Stock

Despite its best efforts, there are plenty of obstacles facing eBay. As a two-sided marketplace, eBay has to continue attracting both buyers and sellers to its platform. And some unscrupulous buyers and sellers make the platform a hard sell for certain brands not willing to take the risk.

Starting out is a slow road too, as you need to raise your rating through transactions in order to gain visibility. Just listing your item on eBay doesn’t guarantee it will be viewed across the massive sales ecosystem.

And investors buying in now are at a higher risk than those who had a shot before prices increased post-lockdowns. It’s not performing as well as giants like Amazon and Walmart (WMT), and there’s a possibility Shopify will help lone-flying businesses stand on their own against the might of eBay.

Shopify Vs eBay Stock: Which Is Best?

Shopify and eBay are highly visible brands in ecommerce, and both grew to historic high valuations during the past year or so. This has investors questioning whether they can sustain revenue growth over the next few years, and there’s good reason to believe both can.

The catalyst is the ongoing migration of businesses to a virtual world, and Shopify’s turnkey solution gave everyone from solopreneurs to major enterprises a way to reach customers and squeeze out sales during the tough times. Still, it may not be the best solution for some businesses that have more complicated revenue lines.

On the other hand, eBay has been battling e-commerce giants for decades. It’s both a secondhand and small business marketplace that big brands are starting to embrace to compete with Amazon. However, it has a ways to go to make up for the losses from spinning out PayPal.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.