Shopify vs. Etsy: Which E-Commerce Stock is the Smarter Buy Now?

Shopify SHOP and Etsy ETSY are established players in the rapidly expanding e-commerce space. Shopify continues to strengthen its position by equipping merchants with a comprehensive commerce stack that includes store-building tools, integrated payments and increasingly AI-powered selling capabilities. Etsy has built a distinct niche through its curated marketplace that connects independent artisans and small business owners with buyers seeking handmade, vintage and one-of-a-kind goods.

Per Mordor Intelligence, the e-commerce market is estimated at $36.21 trillion in 2026 and is projected to reach $77.58 trillion by 2031, indicating a 16.46% CAGR over the forecast period. Growth is being driven by rising smartphone adoption, expanding digital payment infrastructure and deeper AI integration in retail. These forces are narrowing the gap between product discovery and purchase. Both SHOP and ETSY remain well-positioned to benefit from sustained online spending growth.

Let’s delve deeper to determine which stock is a smarter buy now.

The Case for SHOP

Shopify operates as a commerce operating system for independent brands and enterprises. It offers an end-to-end platform spanning storefront creation, integrated payments, logistics coordination and AI-powered merchant tools. Revenue comes from subscription fees and transaction-based income. The model scales as merchant gross merchandise volume (GMV) rises, maintaining limited capital intensity. This structure has supported efficient growth and consistent free cash flow generation.

Momentum continued in 2025. Revenues grew 30% to $11.6 billion, and GMV rose 29% to $378 billion. International markets remain a key growth engine, with revenues outside North America rising 36% and nearly half the merchant base now located internationally. The B2B segment emerges as a high-growth vertical, with GMV nearly doubling during 2025, highlighting a sizable underpenetrated opportunity. Shopify Payments processed 68% of total GMV, reinforcing ecosystem stickiness and transaction capture.

However, competition is intensifying. Large technology platforms are embedding commerce capabilities into broader ecosystems. The Universal Commerce Protocol, developed with Google, positions Shopify within emerging agentic commerce flows. Yet the channel remains early, and monetization pathways are still evolving. Enterprise merchant onboarding is accelerating, but long implementation cycles can pressure near term margins.

The Zacks Consensus Estimate for SHOP's 2026 EPS is pegged at $1.74, down by 2 cents over the past 30 days, while indicating year-over-year growth of 48.72%.

Shopify Inc. Price and Consensus

Shopify Inc. price-consensus-chart | Shopify Inc. Quote

The Case for ETSY

Etsy operates a two-sided marketplace connecting buyers with independent sellers of handmade, vintage and personalised goods. Revenues are generated through listing fees, transaction fees and on-site advertising. The model remains capital light and scales with marketplace engagement. Its differentiated inventory, rooted in human creativity and provenance, serves as a structural moat that mass market platforms struggle to replicate.

The company is undergoing a focused strategic reset built around four priorities. These include showing up earlier in the shopping journey, strengthening machine learning driven matching, deepening loyalty among high-value buyers and reinforcing the human connection that distinguishes the platform. The initiatives address prior weaknesses, including soft buyer frequency, aging demographics and underinvestment in discovery.

The mobile app has become central to the strategy. It delivers a more personalized, discovery-oriented experience that is driving stronger engagement and higher lifetime value versus desktop users. In 2025, Etsy marketplace GMS improved 200 basis points year over year, signaling stabilization.

The planned divestiture of Depop to eBay for $1.2 billion sharpens focus on the core marketplace and removes a profitability drag. Early agentic commerce partnerships with ChatGPT, Microsoft Copilot and Google open incremental discovery channels that align well with Etsy’s high consideration inventory. Positive GMS growth is expected across each quarter of 2026.

The Zacks Consensus Estimate for ETSY's 2026 EPS is pegged at $3.35, up by 30.86% over the past 30 days, indicating year-over-year growth of 141.01%.

Etsy, Inc. Price and Consensus

Etsy, Inc. price-consensus-chart | Etsy, Inc. Quote

Price Performance and Valuation of SHOP and ETSY

Image Source: Zacks Investment Research

Over the past six months, shares of SHOP and ETSY have declined 14.5% and 6.4%, respectively. Weak macro conditions and concerns around discretionary spending have weighed on the broader e-commerce sector.

SHOP and ETSY Stock Price Performance

Valuation-wise, SHOP shares are currently overvalued, as suggested by a Value Score of F, whereas ETSY’s shares are cheap, as suggested by a Value Score of B.

In terms of forward 12-month Price/Sales, SHOP shares are trading at 10.44X, higher than ETSY’s 1.73X. ETSY's considerably lower multiple reflects a marketplace in active recovery with an improving profitability profile and a differentiated inventory moat that remains underappreciated currently. SHOP's elevated multiple, while supported by strong top-line growth, incorporates significant execution expectations that are yet to fully materialize.

SHOP and ETSY Valuation

Image Source: Zacks Investment Research

Conclusion

Etsy's ongoing marketplace recovery, focused capital allocation following the Depop divestiture and differentiated inventory moat make it a better choice over Shopify at current levels. ETSY presents a compelling investment opportunity, with its turnaround still in early stages and several growth catalysts yet to be fully priced in. Shopify's fundamental strength remains intact, though its elevated valuation and evolving agentic commerce monetization pathway make it prudent to wait for a more attractive entry point.

Currently, ETSY sports a Zacks Rank #1 (Strong Buy), making the stock a stronger pick compared with SHOP, which has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research