BigCommerce vs Shopify stocks: Here’s why SHOP beats BIGC

Shopify (SHOP) and BigCommerce (BIGC) stock prices have diverged in the past few years. BigCommerce has dropped to a record low and is down by more than 95% from its highest point on record.

Shopify, on the other hand, has staged a strong recovery after bottoming in at $26.56 in 2022. It has risen by over 188% to $75, giving it a market cap of over $92 billion. 

Similar companies have diverged

BigCommerce and Shopify are similar companies that solve a real problem in the e-commerce industry. Their software platforms help people to build and launch e-commerce websites without doing any coding. 

This is a big industry now that most companies, including small and medium businesses (SMBs) have started to embrace e-commerce. The need for an online store grew during the pandemic as most retailers were forced to close their shops. 

The two companies are also widely used by individuals who are just starting their businesses, including drop shippers. 

Shopify’s growth has been phenomenal over the years as it has continued to gain market share in the e-commerce industry. Its annual revenue has moved from below $1.6 billion in 2019 to over $7.7 billion in the trailing twelve months. It has also become a highly profitable company. 

BigCommerce has also grown as its revenues jumped from $112 million to over $309 million. Unlike Shopify, it is yet to turn an annual profit, which explains why the stock has underperformed.

BigCommerce is seeing slow growth

Recent financial results show that BigCommerce’s business has started slowing down as the company struggles to add new customers. Its revenue rose by just 8% in the second quarter to $81.8 million. 

Most importantly, the closely watched annual run rate rose by just 4% to $345 million. More data showed that the number of active accounts rose by just 1% while its subscription revenue came in at $61.8 million. 

Shopify continued its loss-making streak as its net loss narrowed to $11.3 million from the $19.1 million it made a year earlier. These numbers mean that its business is no longer growing even as global e-commerce sales thrive.

Analysts are less optimistic about its forward growth metrics. The average estimate is that BigCommerce’s revenue will come in at $83 million in the third quarter, a small increase from the $78 million it made a year earlier. Its annual revenue is expected to grow by 7.6% to $333 million.

Shopify is seeing strong growth

Shopify, on the other hand, is doing well as its revenue and profitability growth accelerates. Its quarterly revenues rose by 21% to over $2 billion, a good number for a company that has been in the industry for almost 20 years. 

Its Gross Payment Volume rose to $41 billion, an important thing since Shopify takes a cut for each transaction that its platform facilitates. 

Shopify issued good forward guidance and is expecting its revenue to grow by a low-to-mid-twenties percentage rate. Analysts expect that Shopify’s revenue will be $2.89 billion in the third quarter and over $11.8 billion in the full year. 

Analysts are more optimistic about Shopify stock. Evercore’s Mark Mahaney expects the stock to continue beating Amazon while Morgan Stanley believes it has more upside.

Why Shopify beats BigCommerce

There are four main reasons why Shopify has continued to do better than BigCommerce. First, it has a better brand name than BigCommerce. This popularity means that any company that wants to start an e-commerce brand will likely try it first. 

Second, Shopify is cheaper than BigCommerce. Its most basic package starts at $24 a month while BigCommerce’s starts at $29. As such, most people will always go for a bigger brand that is cheaper.

Third, Shopify is not only popular but it is also spending more money on marketing. Its most recent financial results shows that it increased its marketing spending to $413 million from $405 million last year.

BigCommerce, on the other hand, reduced its marketing budget as it continued to focus on profitability. Its sales and marketing revenue dropped to $34 million, meaning that it will most likely struggle to gain market share.

Additionally, for most people who don’t know BigCommerce, its platform looks difficult to use. When you visit Shopify’s website, the first call to action is to start a free trial.

On the other hand, when one visits big commerce, the call to action is to get a quote and request a demo. To many ordinary customers, this is a lot of work and a bit inconvenient. To start a free trial, one needs to select the BigCommerce Essentials tab on the top of the website, which explains why BigCommerce has struggled to gain market share. 

BigCommerce’s website is designed like that because the company mostly focuses on big brands. In the most recent earnings, the company said that it added companies like The RealReal, Quicken, and Soletrader. 

Therefore, while Shopify is quite expensive, I believe that it will continue doing better than BigCommerce. In fact, I suspect that it is common for shops to move from BigCommerce to Shopify than vice versa.