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Shopify Up Over 8% on Rumors of Partnership with Amazon

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Shares of Shopify Inc. (SHOP - Free Report) jumped more than 8% on Thursday (Jan 5), following rumors that the e-commerce company is going to close a major sales partnership with Amazon.com (AMZN - Free Report) on Jan 10, 2017.

This will mark the completion of the long integration process that started in Sep 2015. We also note that in Dec 2016, Shopify had made the integration partially available to its merchants to enable them to manage their product catalogs on various online e-commerce platforms (including Amazon) directly from Shopify.

SHOPIFY INC Price and Consensus

How is Shopify Poised to Benefit?                 

If the deal materializes, it will translate to a bigger playing field for Shopify merchants as they can reach out to millions of customers on Amazon. Consequently, the top line of the company will improve.   

We note that Shopify has already partnered with Facebook in the past to tap into its huge user base. After the close of the third quarter, the company announced the integration of Shopify within Facebook Messenger to enable merchants to sell their products.

As per a statistia.com report, worldwide spending on retail e-commerce is expected to cross $485 billion in 2021. Given the huge opportunity the segment offers, such integrations with major e-commerce players such as Amazon will no doubt put the company in good stead.

Stock Performance Overview

Shares of Shopify have outperformed the broader Zacks Internet Services industry over the last 12 months. While the industry generated a positive return of only 9%, the stock returned a whopping 93.3%.

The outperformance of the stock could be primarily attributed to Shopify's rapid market share growth, a leveraged operating model and an improving scenario for customer lifetime values. However, a slowdown in consumer spending, pricing pressure and competition remain concerns for the company going ahead.

Zacks Rank & Key Pick

At present, Shopify carries a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology space is NVIDIA Corporation (NVDA - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, the consensus estimate for NVIDIA’s current year has improved to $2.43 from $1.86 over the last 30 days.

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