In this year’s sell-off, few stocks have been struck as badly as Shopify stock (NYSE:SHOP).

The e-commerce software company’s stock has dropped over 85% from its high about a year ago. 

It’s also changed its leadership team, announced an unexpected stock split, and seen its earnings from a year ago turn into losses.

However, there is another reason why Shopify stock (NYSE:SHOP) has plummeted this year. New competition from Amazon (AMZN) in the form of Buy with Prime has worried investors, who are concerned that the e-commerce behemoth may force Shopify out of a lucrative income stream.

Is This a True Shopify Stock Killer?

Bloomberg reported in September that Amazon was closing or scrapping plans for 42 facilities and postponing the construction of 21 more.

The announcement is just another indication that Amazon’s sales growth is falling short of the company’s own projections. Amazon also announced a hiring freeze in its corporate retail sector. The decision to have a second Prime Day seemed to be motivated by the desire to clear off surplus inventory before the Christmas season.

Shopify is no longer a minor player in the e-commerce industry. The company’s platform currently boasts more than $200 billion in yearly gross merchandise volume (GMV), making it one of the world’s largest retail companies. Last year, Amazon’s GMV surpassed $600 billion.

Amazon may be three times the size of Shopify in terms of sales volume, but it will still need a large increase in capacity to make a dent in Shopify’s revenues. The choice to shut or postpone additional warehouses seems to signal that Buy with Prime isn’t gaining traction in a way that would harm Shopify stock (NYSE:SHOP). Alternatively, Buy with Prime may be tough to implement, implying that it may not be accessible to all Shopify businesses very soon.

What Does This Signify for Shopify Stock?

Shopify management expects the challenges it has experienced to remain in the second half of the year. Still, e-commerce is to resume its historical growth trajectory, which has been about 15% annual growth in the United States.

If Shopify’s third-quarter earnings release beats forecasts, the stock might receive a much-needed lift. Analysts anticipate a 16% increase in sales to $1.3 billion and an adjusted per-share loss of $0.11 when the business reports on Oct. 27.

With Shopify stock (NYSE:SHOP) down over 85% from its high and the Buy with Prime threat seeming exaggerated, it might be a great time to invest in Shopify.

Featured Image-  Megapixl @ Burdun

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