Analyzing Shopify (NASDAQ:SHOP) and Fastly (NASDAQ:FSLY)

Shopify (NASDAQ:SHOP) and Fastly (NASDAQ:FSLY) are both technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, earnings, valuation, risk, profitability, analyst recommendations and dividends.

Analyst Ratings

This is a summary of current recommendations and price targets for Shopify and Fastly, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shopify	0	9	37	3	2.88
Fastly	2	5	7	1	2.47

Shopify currently has a consensus target price of $177.28, suggesting a potential upside of 5.10%. Fastly has a consensus target price of $27.42, suggesting a potential upside of 12.32%. Given Fastly’s higher probable upside, analysts clearly believe Fastly is more favorable than Shopify.

Profitability

This table compares Shopify and Fastly’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Shopify	14.53%	12.58%	10.94%
Fastly	-11.80%	-6.31%	-4.04%

Insider & Institutional Ownership

69.3% of Shopify shares are owned by institutional investors. Comparatively, 79.7% of Fastly shares are owned by institutional investors. 4.2% of Fastly shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Shopify and Fastly”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Shopify	$11.56 billion	18.78	$1.23 billion	$1.48	113.97
Fastly	$624.02 million	6.23	-$121.68 million	($0.53)	-46.06

Shopify has higher revenue and earnings than Fastly. Fastly is trading at a lower price-to-earnings ratio than Shopify, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Shopify has a beta of 2.62, suggesting that its share price is 162% more volatile than the S&P 500. Comparatively, Fastly has a beta of 0.31, suggesting that its share price is 69% less volatile than the S&P 500.

Summary

Shopify beats Fastly on 11 of the 14 factors compared between the two stocks.

About Shopify

Shopify Inc., a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, Australia, China, and Latin America. The company’s platform enables merchants to displays, manages, markets, and sells its products through various sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces; and enables to manage products and inventory, process orders and payments, fulfill and ship orders, new buyers and build customer relationships, source products, leverage analytics and reporting, manage cash, payments and transactions, and access financing. It also sells custom themes and apps, and registration of domain names; and merchant solutions, which include accepting payments, shipping, and securing working capital. The company was formerly known as Jaded Pixel Technologies Inc. and changed its name to Shopify Inc. in November 2011. Shopify Inc. was incorporated in 2004 and is headquartered in Ottawa, Canada.

About Fastly

Fastly, Inc. operates an edge cloud platform for processing, serving, and securing its customer's applications in the United States, the Asia Pacific, Europe, and internationally. The edge cloud is a category of Infrastructure as a Service that enables developers to build, secure, and deliver digital experiences at the edge of the internet. The company offers network services to speed up and optimize the delivery of web and application traffic; device detection and geolocation; content delivery network, such as dynamic site acceleration, origin shield, instant purge, surrogate keys, programmatic control, content compression, reliability features, fanout, domainr, privacy, and modern protocols and performance services; and video/ streaming solutions and services, including live streaming, video on demand, and media shield. It also provides security solutions, such as DDoS protection, next-gen WAF, bot management, API and ATO protection, advanced rate limiting, and compliance services; load balancing; image optimization; transport layer security (TLS), platform TLS, and certainly; and origin connect. It serves customers operating in digital publishing, media and entertainment, technology, online education, travel and hospitality, and financial services industries. The company was formerly known as SkyCache, Inc. and changed its name to Fastly, Inc. in May 2012. Fastly, Inc. was incorporated in 2011 and is headquartered in San Francisco, California.