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Better E-Commerce Stock: Shopify vs. Baozun | The Motley Fool

shopify (shop -7.22%) and baozun (bzun -0.94%) make it easy for businesses to create online stores. Canada-based Shopify helps more than 1.7 million businesses set up online stores around the world. it also enables merchants to process payments, fulfill orders, and organize their social media and marketing campaigns with its self-service tools.

China-based

baozun helps large multinational brands such as nike and starbucks enter the Chinese market. it is not a self-service platform like shopify. Instead, Baozun sets up online stores, logistics services, and marketing campaigns with its own staff, so foreign companies that outsource those tasks to Baozun don’t need to worry about hiring their own sales, technology, and support teams in China.

Reading: Baozun vs shopify

i compared these two e-commerce companies a year ago and stated that baozun’s lower valuation would allow it to outperform shopify in 2021. that was clearly a bad call: baozun’s stock is down roughly 60% in the last 12 months, but shopify stock is up over 30%.

let’s see why I completely screwed up with baozun, and if it still has a chance to bounce back and catch up with shopify next year.

what went wrong with shopify

A year ago, I believed shopify’s growth would slow significantly as it faced tougher year-over-year comparisons in a post-pandemic market. well, that slowdown did happen, but it wasn’t that severe. After rising 86% in 2020, shopify revenue is up another 66% year-over-year in the first nine months of 2021, with analysts expecting it to rise 56% for the full year.

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shopify attributed the continued momentum to its expansion into the omnichannel market, which includes integrated social media shopping experiences, spotify music purchases and other non-traditional shopping methods. it also expanded beyond its core market of smaller merchants by establishing new shopify plus partnerships with larger brands like logitech.

earnings have also continued to improve. While adjusted gross margin declined during the pandemic in 2020, it expanded year-over-year in the first nine months of 2021. On an adjusted basis, net income soared more than 14-fold in 2020, then more than doubled year-over-year. year. year in the first nine months of 2021. Analysts expect its adjusted earnings per share to roughly double for the full year.

The other issue I had with spotify was their rating. That hasn’t changed: It’s still well valued at nearly 280 times future earnings and 23 times next year’s sales, leaving it highly exposed to inflation-related liquidations.

what went wrong with baozun

Last December, I expected baozun’s growth to hold steady as the pandemic passed and international companies refocused on Chinese buyers. but baozun’s growth was not so impressive this year. Its revenue increased 22% in 2020, but only 13% year over year in the first nine months of 2021. Analysts expect its revenue to rise only 6% for the full year.

Baozun attributed his slowdown to macroeconomic headwinds to the Chinese economy, a decline in the country’s consumer confidence, and the government’s continued crackdown on major e-commerce players such as alibaba. unresolved trade tensions between the us and China, coupled with current supply chain challenges, are likely exacerbating that pain.

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Baozun’s operating margins expanded year-over-year in 2020, but declined significantly in the first nine months of 2021 as it grappled with slowing sales growth and rising operating costs.

On the plus side, its gross margins held steady above 60% as it drove more business toward its higher-margin “no distribution” model, which allows companies to directly ship their products to Chinese customers. bypassing the capital of baozun. intensive logistics network.

baozun’s adjusted earnings grew 50% in 2020, but analysts anticipate a 75% drop this year as its operating margins continue to crumble. Therefore, Baozun shares still cannot be considered a bargain at 16 times future earnings and less than once this year’s sales.

shopify is the best buy right now

shopify stock looks expensive but has a much brighter future than baozun. it will continue to thrive as more companies declare independence from third-party mass markets like amazon, and it still has plenty of opportunity for growth in omnichannel platforms and foreign markets.

baozun is still one of the main gatekeepers of china’s online shoppers, but right now it faces too many macroeconomic hurdles. China’s ongoing crackdown on its major tech stocks, along with the US. uu. threats to delist shares of Chinese companies that do not meet the strictest auditing standards make it even less attractive.

this time i think shopify is a better ecommerce stock than baozun. I’ll check back next year to see if I made the right decision.

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