Buy One, Sell The Other: Post Amazon Pre-Shopify Earnings Reviews

In the world of e-commerce and cloud computing, Amazon and Shopify have long been rivals in different arenas—Amazon as the behemoth of everything from retail to AI, and Shopify as the agile enabler of small businesses. Now, with Amazon’s Q1 2025 earnings in the rearview and Shopify’s report looming on May 8, investors face a critical decision: Which stock deserves a buy, and which merits a sell? Let’s dissect the numbers and strategies to find an answer.

Amazon’s Q1 2025: Strength in Scale, Yet Shadows Linger

Amazon’s first-quarter results were a mixed bag of robust growth and lingering challenges. Net sales rose 9% to $155.7 billion, with AWS leading the charge with 17% growth to $29.3 billion. This underscores AWS’s dominance as the world’s second-largest cloud provider, trailing only Microsoft’s Azure.

The profit picture was bright: Net income surged to $17.1 billion, or $1.59 per share, a 62% jump from last year. However, free cash flow dropped to $25.9 billion, down from $50.1 billion in Q1 2024. This contraction raises concerns about capital allocation amid investments in rural broadband (Project Kuiper), luxury retail (Saks on Amazon), and AI tools like SageMaker Unified Studio.

The Q2 guidance suggests caution: Amazon forecasts sales of $159–$164 billion (7–11% growth), but operating income could dip to $13–$17.5 billion, down from $14.7 billion last year. Margins are under pressure, likely due to rising costs tied to new initiatives.

Shopify’s Q1 2025: The Wait for a Turnaround

Shopify, by contrast, faces a high-stakes moment. Analysts expect Q1 EPS of $0.26, up 30% year-over-year, but this estimate has been trimmed 2% in the past month. The company’s Q4 2024 results disappointed, missing EPS by $0.10, and its stock has been volatile, trading at $116.80 as of January—down 2% from its peak.

The key question: Can Shopify prove it’s still the go-to platform for small businesses amid rising competition from Amazon’s SaaS tools, Walmart’s e-commerce push, and BigCommerce’s growth? Investors will scrutinize GMV (gross merchandise volume) and merchant acquisition rates. A beat could revive hopes that Shopify’s AI investments (e.g., personalized marketing tools) and partnerships (e.g., logistics firms) are paying off.

Why Buy Amazon?

1. AWS’s Unrivaled Position: AWS’s 17% revenue growth in Q1 outpaces the cloud industry’s average. Its AI tools and enterprise contracts are hard to replicate.
2. Diversification Pays: From Alexa+ to Saks on Amazon, the company is expanding into adjacencies where competitors lack scale.
3. Cash Flow Resilience: Even with the free cash flow dip, Amazon’s TTM operating cash flow rose 15% to $113.9 billion—a cushion for investments.

Why Sell Shopify?

1. Margin Pressure: Shopify’s Q2 2024 gross margin fell to 53% from 56% a year earlier, signaling cost inflation.
2. Earnings Volatility: While the Zacks Earnings ESP model gives a +15% beat probability, Shopify’s institutional ownership (69%) is a double-edged sword—bullish bets could reverse quickly.
3. Amazon’s Shadow: As Amazon expands into Shopify’s niche (e.g., small-business tools), competition could squeeze margins further.

The Verdict: Buy Amazon, Sell Shopify

Amazon’s Q1 results reaffirm its ability to grow across markets, while Shopify’s path is fraught with execution risks. Amazon’s stock trades at 31x forward P/E, cheaper than Shopify’s 61x multiple. Even with free cash flow concerns, Amazon’s scale and AWS’s moat justify a buy.

Shopify, meanwhile, needs a clean Q1 beat to stabilize its narrative. A miss could push the stock toward its 52-week low of $48.56. Until then, the risks of overpaying for growth in a slowing economy tilt the scales toward selling.

Conclusion

Investors should prioritize Amazon’s proven resilience and AWS’s leadership, while remaining cautious on Shopify until it delivers consistent growth. The data is clear: Amazon’s Q1 results show a company thriving in multiple markets, while Shopify’s success hinges on a single quarter—a high bar for a stock priced for perfection.

The verdict is in: Buy Amazon, and consider Shopify a hold—or even a sell—until the next earnings report proves otherwise.