Critical Survey: Fastly (NASDAQ:FSLY) versus Shopify (NASDAQ:SHOP)

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

Risk and Volatility

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

Analyst Recommendations

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

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

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

Profitability

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

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

Institutional & Insider Ownership

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

Valuation and Earnings

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

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

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.

Summary

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

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.

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.