Shopify Retreats, Amazon Attacks

In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Tyler Crowe, Matt Frankel, and Lou Whiteman discuss:

• Shopify’s underwhelming quarter.
• Amazon’s planned logistics push.
• When to sell your winners.

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A full transcript is below.

This podcast was recorded on May 6, 2026.

Tyler Crowe: Amazon's next target is shipping on Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. As we've said before, new name, same great podcast. I'm Tyler Crowe. I'm your host today. I'm joined by longtime Fool contributors, Lou Whiteman and Matt Frankel. As I mentioned in the headline, we're going to talk about this new move that Amazon is doing by going into the shipping and logistics business in ways that they've never done before. Also, we're going to answer some listener mailbag questions.

But first, we want to start with the topic that we started for the day. It is earning season, so we want to get into earnings at Shopify. Shares of Shopify are down about 9 percent as we are taping this podcast today. It was down as much as 10 percent, both in pre-market and early market trading this morning after the company released first-quarter earnings. Of all the three of us here, I am the non-Shopify follower here, so I'm going to lean on you guys. But when I first looked at the press release, I would say, in a vacuum, the numbers looked fine. Revenue was up 34 percent year over year. Gross merchandise volume, the amount of stuff that was bought on its platform, passed $100 billion for the first time. Net income, taking out some investment gains and losses that aren't really related to the actual operating business, was 360 million. Though here's the knock. It did miss expectations for the quarter, and this is the second quarter in a row that it actually missed Wall Street expectations for operating earnings. Guys, I want to get your thoughts on this, and was this missing Wall Street earnings for the second time, adding to AI jitters? Was it maybe just Wall Street's expectations being a little too high? When you saw these results, how did you see them? Matt, let's start with you.

Matt Frankel: Well, like pretty much any other stock in earning season, it's all about expectations. Shopify grew revenue by 34 percent in the first quarter, but they're guiding for full-year revenue growth in the high 20s range. If you have 34 percent in the first quarter, high 20s, the rest of the year, the law of averages tells you you're going to have a slowdown as you head into the rest of the year. I'm not as worried about the net income number and the net income miss. I don't think that's what's driving the stock here. If a company's growing sales at 34 percent year of a year and is profitable, then that's great in and of itself. Shopify is in a very investment-heavy phase right now. As you mentioned, it's trying to keep up with AI headwinds and things like that. That can make bottom-line income lumpy, but we really need to show the revenue growth to justify the spending. It needs to keep revenue growth at an elevated enough level, and it doesn't sound like they gave an optimistic enough outlook to satisfy investors with the stock trading at 65 times forward earnings, more than 12 times sales. Whatever metric you want to use, it's an expensive stock.

Lou Whiteman: That's the thing. It's funny because we're all guilty of it. We all like scoreboards. We look at what the stock is doing and say, bad quarter, bad company, good quarter, good company. Sometimes, usually, it's not that simple. Tyler, it looked good in a vacuum. It looked good in a dustbin. It looked good in a Swiffer. It looked good. This was a good quarter, but everything is relative. Valuation is returning to Earth, but arguably not yet on Earth, and when you traded a premium, you are expected to deliver a premium return. Shopify's guidance doesn't clear the bar for me; apparently, it doesn't clear the bar for the market, either. I think that's basically not company bad, company good. I think that's the conclusion. I note here, too, is like if you look at five years, Shopify is basically flat. They are up, I think, one percent. Now, they've been up 80 percent and cut in half during that period, so this is a company that tends to swing violently around different moods. I own the stock. To me, it's a definition of a hold. If it comes down, it may begin to look interesting to add to it, but we also have the weaker consumers still looming as a question mark. I think this is just focus on the long term and not get too caught up on 20 percent versus 30 percent in any one quarter.

Tyler Crowe: Matt, I want to dig a little bit more into what you were mentioning about this being an investment heavy phase for the company, because this is something that I found a little peculiar as I was looking through the press release, I was looking at the financial statements and this is where it gets something feels different for me, and I'm trying to figure it out. It has lots of cash, and it also holds a lot of equity and long-term investments in other companies, relative to the total balance sheet of its size. I would expect high amount of investments in other companies, if it was like an insurance company or something like that, going out and making investments, investing in the flow.

But this is an e-commerce software and platform company that’s looking to invest in its platform, looking to build out better multi-channel solutions for its clients, as well as fending off this world of AI, like, how does Shopify fit in this world of AI? Yes, the company throws off a lot of free cash flow, and it has more than its needs and so holding on to equity is not a big deal, but three quarters of its balance sheet is either cash equivalents, like treasuries or investments in other companies. Now, considering the quarter, missing earnings expectations, being in this investment-heavy phase, as you mentioned, it seems like something's not squaring here, either management's I would say, distracted by side quest of owning other companies rather than dedicating and allocating that cash back into the business to build out what it wants to do. Now, Lou, I want to start with you and then when we get to Matt.

Lou Whiteman: Look, they haven't done a secondary offering since 2021. They have almost no debt. They don't seem they are investing with free cash flow. I wouldn't sell these investments just unless you need to, and it doesn't look like they need to. Matt can get into it. I don't think that this is really a distraction on management's time. I don't think they're out doing the Warren Buffett thing, reading through 10Ks, trying to find companies to invest in things like this. This is trying to capture upside of partnerships. You can get into that, but this, to me, I don't have a problem with.

Matt Frankel: You correctly pointed out that three fourths of the balance sheet is investments and cash and equivalence, which I'm a big fan of having a lot of cash and equivalence on the balance sheet, first of all, so that's a big positive for Shopify. But for the most part, and Lou mentioned this, the outside investments were the results of partnerships. For example, the largest investment Shopify has in a publicly traded company that's not Shopify is a firm. They own a roughly one-and-a-half-billion-dollar stake, and it started when a firm became the exclusive provider of Shop Pay installments, even before they went public. They granted Shopify warrants as part of the deal at a $0.01 exercise price. It was really a deal sweetener to be we want exclusivity on your new product, and we'll give you some equity in our company. A similar situation occurred when Global-e formed a cross-border logistics partnership with Shopify in 2021. They got equity as part of the deal. Shopify's management has specifically said several times that these investments aren't relative to the fundamentals of its business. They're not what management's focused on. They're smartly negotiated perks in exchange for partnerships, not a core part of their strategy. After all, like I said, a firm literally costs next to nothing. I don't dislike this part of the strategy. I don't think it's a distraction from management.

Tyler Crowe: That's fair. I guess, looking at, again, in the vacuum less familiar, you see all these equity investments. You're like, that doesn't make a lot of sense. The one thing I would point out, though, is that this is a company that does use a lot of stock-based compensation and throwing off a lot of cash while throwing off a lot of stock-based comp, maybe start using some of that cash to pay some investors or pay your employees and let the investors not get deluded as much.

Lou Whiteman: I wouldn't argue against that at all, Tyler.

Tyler Crowe: Coming up after the break, Amazon's daring move into supply and logistics.

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Tyler Crowe: The transportation and logistics industry got rocked yesterday after Amazon announced it was launching Amazon supply chain services that would allow third party businesses to use Amazon's existing supply chain network that it uses for its internal shipping and transportation and all that stuff and allow those third-party businesses to basically latch on and use these services just like it was cloud services or any other pay for type of service that Amazon provides. Now, there were dozens of companies in trucking, shipping, logistic stocks that dropped sharply in the news.

I think the biggest examples of it and probably the most well-known names that this happened to was companies like UPS and FedEx, both declining nearly 10 percent on the move. I want to get into this question here will this really up end UPS and FedEx? We can go in a lot of different ways, but the supply chain offering is much more than just shipping for what Amazon is doing. It's doing fulfillment, storage, and warehousing, air and ground freight, its ability to do store fulfillment, letting customers use its in-house multi-channel fulfillment software and integrations. This is not just like give us your stuff, and we'll ship it for you. My question is, is this the type of solution that would allow someone to buy logistics a box solution and bypass a lot of this other stuff? I would say rendering UPS, FedEx, I wouldn't say obsolete, but definitely less relevant. I think it's a lot more on offer here than what a basic shipper can really can.

Lou Whiteman: It's interesting because, for one thing, we don't know exactly what Amazon is going to offer here. They didn't really get into details. Reading between the lines, I don't think they're targeting logistics in the box, like, do the whole thing. I don't think they really necessarily want to get something to the house. They are doing B2B. If you think about it, if you're say Honda and you're shipping parts to dealerships all over the country to get those parts, from the port of Los Angeles to all your dealers, store them until the dealers need them. That's the part they're going after. It's more predictable, it's more lucrative. I think the concern for UPS or a FedEx is that if their margins disappear there, it puts pressure on the entire system. It makes some of the less profitable parts of the business that are might be subsidized by the B2B by this back office. It puts them at risk. All in all, I'm curious. There's a weird tension here between, did Amazon really substantially overbuild to the point where they could actually take on even just a fraction of what UPS and Amazon has, or are they going to commit billions in capex here to build this out at the same time they're building data centers. It has to be one or the other, and I doubt it's A, and I don't think they're going to be B. I think they're a player here, but I don't think they're just going to annihilate everyone or take everyone's business.

Matt Frankel: Lou alluded to this, but commercial freight, which is what he's talking about there with the Honda parts and things like that, that's the highest margin part of FedEx and UPS's business, period. Amazon specifically named some lucrative customers. Honda wasn't one of them, but Procter and Gamble and 3M were, and those are major shippers. Even if Amazon doesn't completely disrupt the businesses of FedEx and UPS, the emergence of a major player like Amazon does create pricing pressure, especially because Amazon, with excess capacity, like Lou mentioned, has at least at the start, a favorable pricing structure. There's a solid argument to be made that if there was a real threat of disruption, we would have seen these stocks down more than 10 percent. If Amazon took a 10 percent share of the market, the hit to FedEx and UPS on the bottom line would probably be significantly more than 10 percent, especially when you think long term. I'm not that worried. I think it's really just a knee-jerk reaction.

Tyler Crowe: Here's the other part I'm trying to figure out, too, from the Amazon side is the why now. Obviously, UPS has been struggling a little bit lately with its decision to shrink to focus on B2B, to focus on healthcare shipping, less volume, more margin business, what Amazon seems to be attacking here and maybe it's a strike while the competitors are down or something like that. But what is most curious to me about Amazon's decision now is this is in the midst of a massive AI infrastructure build-out that it's taking. It's hundreds of billions of dollars in capital to make it happen, not just this year, but for the next several years, Amazon's capital expenditures are in the $175-$200 billion range already. Now we're going to layer on spending to meet growing supply chain and logistics businesses. I mean, yes, it has an existing system already, but if you're going to start taking on volume for the third parties, it's obviously going to require more capacity. I'm curious as why go into this when you have this lucrative AI infrastructure section that you're going into? It makes me wonder, how much money do you want to spend? Because this is already tallying up to be a very large bill.

Lou Whiteman: Why now is a great question. To some extent, the answer is this was always the plan. It might just be they've built out the critical mass to make it possible that took time, and so they're just doing it now because they can. Tyler, I do think that this could be a sign of a capital constrained company. Because the weird thing about this is they have to build all of this for their own business. Instead of adding capex, in a way, this offsets capex, if you can monetize some of it, turn it into revenue. In a world where Amazon does have to continue to scale logistics and they are trying to spend billions in a data center, maybe trying to get some of that logistics spending covered by third parties. If you think of it that way instead of just investing in the business just for the revenue, I think it might make more sense, but again, I do think it speaks to what Matt was saying. It speaks to the limits to the ambitions here in terms of just wiping out an industry versus just trying to generate some revenue off of it.

Matt Frankel: This move might not require as much capex at first as you might think. Amazon has just to give you some of the numbers, over 200 fulfillment centers already, over 80,000 trucks, 100 cargo aircraft that it owns, and more. It has excess capacity right now. Being able to fill that capacity cheaply is a big advantage to getting this started. But the idea is, by the time capex is needed, this will have been a proven business model. But on the other hand, FedEx and UPS have significantly greater capabilities when it comes to things like ocean freight forwarding and other critical areas of the process that Amazon would have to spend heavily on. It is a really good question, the why now? Why is this the optimal time to build this out?

Lou Whiteman: One thing I caution people on, too, is that the data center comparison is obvious with AWS. I don't think it is a great like for like, though, because chips are chips. Data center is data center. It's just if not commoditized, it's pretty close. With this, what we're talking about is basically carving out a section of an Amazon warehouse for someone else's stuff. There are going to be some customers where that's very attractive. But GXO Logistics was one of the companies was down almost 20 percent. What they are offering for a company like Apple is, we're going to run your own warehouse. We're going to manage our inventories. We're going to manage all of that in a dedicated facility. I can't speak for Tim Cook, but I doubt Tim Cook wants all of his inventory just piled into the back of random Amazon warehouses. Capacity where you have it matters, unlike data centers. I don't want to whistle past a graveyard here. I think there's a real threat to these companies, but I do think that it's going to be harder in practice than it is, maybe just with data centers and some of the other areas. I think these other companies can survive and thrive even with Amazon.

Tyler Crowe: It will also be an interesting topic to follow because perhaps we're being slightly market reactionary here, but obviously you hear shipping and logistics, like they're going after Amazon and UPS. But like I said, at the top, there are dozens of companies in the supply chain in logistics, whether it's freight forwarding, whether it's ground transport, less than truckload trucking. This could be a disruptive in a lot of different sectors, and it'll be interesting to really drill down to figure out who is going to be affected the most and how we can better invest in this was a thing that came out yesterday, and I feel like this is something like a long term deep study project that would be worth coming up for the next couple of months. Unfortunately, this is a 20-minute podcast, so we can't do that right now.

After the break, we're going to hit our mailbag. Hey, just a quick reminder, if you want to get your questions into us, we love answering them. You can email us at podcast@fool.com. That's podcast@fool.com. I've been saying there's two requests, but I feel like my laundry lists of requests for this are getting longer and longer, but No. 1, keep it Foolish. No. 2, keep it relatively short so I can answer it on air, and three, we do have to remember we cannot give personalized advice. If you want to ask a question, we can share our thoughts and opinions, but please don't misconstrue anything that we say to be personalized advice for anybody asking any questions.

With that guidance and disclosure, whatever you want to say, our email today comes in from Pranjal Soontar. I hope I pronounce that name right. I apologize if I got it wrong and here's his question. Hi, Motley Fool team. I'm a regular to the podcast. I've been having trouble executing or the refining the strategy of letting the winners run or just buying and holding through the ups and downs in the market. I'll take two examples to showcase his dilemma. I'm long-term bullish on two companies, Axon Enterprise, AXON, and Sterling Infrastructure, STRL. Both of them I've trimmed because I felt the valuation was too high. One I got right, one I probably got wrong. At times, valuation seems too high and feel like taking the gains, but you can lose the long run of these stocks and never get a re-entry if they continue to win. Any thoughts on how you guys like to manage this? Cheers. Matt, let's start with you.

Matt Frankel: My short answer is the reasons for the profit taking matter. For example, I've done this in the past if the valuation became too high and became too high of a percentage of my portfolio for comfort. Even though if it ends up going higher, in my case, it was Apple that I sold for that reason, it's not necessarily a bad move. But in general, I ask myself, is the higher valuation justified by the recent results? Do I believe in the ability of management to keep the growth story going? Above all, do the reasons I bought the stock in the first place still apply? I don't necessarily think you make a bad move by trimming, especially if you have valuation concerns, but it really depends on the specifics of the situation.

Lou Whiteman: Sterling's up 47 percent last I looked today. That's brutal, and I get it. I don't know if I've ever been there where 47 percent up a day and on a stock I sold, but it feels terrible, and I get that. I got to say, though, taking profits to me is never a terrible thing. I do try and appreciate the fact, well, profit is good. I don't think there's a perfect formula. The closest thing is something Matt said is that I try and look at the reasons I bought in the first place and ask, are they still valid? If they're still valid, I'd probably want to hold on. But if not, or if the thesis has played out or I just got lucky in the reasons I bought weren't the reasons it went up, maybe that's a reason to look elsewhere. That's really hard to do. It's a good reason to write down or at least remember the reasons you buy, whether you journal, something like that. But again, for me, I try to stay with something as long as I believe it, whether the stock is doubled in price or cut in half and that's a lot harder in practice than it is to talk about.

Tyler Crowe: There is no great answer to this, because if everyone knew exactly how to execute the letting your winners run strategy, I think we'd all be incredibly good at this, and everyone would be rich, and nobody would have to worry about asking questions like this, but this is really that intersection of the emotional aspect versus the rational aspect, because valuation does have this very emotional component for it. How much am I willing to pay for growth? Or how much am I willing to pay for value? Valuation, regardless of the type of stock is going to come into it some way or the other. Sometimes, valuation is less of a concern, depending on the company, but it always is in the back of your mind. You see a large price gain, and you're like, wow, can I really do much better? To both Matt and Lou's point, it really depends. It depends on the growth trajectory of the business, whether they can maintain it for a long period of time and sustain it for years to come. If that's possible, then yeah, then letting your winners run is great.

But if you start to look at the fundamentals of the business, perhaps the thesis is changed, perhaps the growth is slowing. It's a cyclical business. All these things have to be considered. There is no tight, neat, perfect formula for any of this, and unfortunately, that's not the most satisfying answer for investors, but that's why it's hard. It's why we like to talk these things out, and it's why we like to answer your questions, because it makes it a lot of fun, interesting, and engaging. But that's all the time we have for today. I want to thank Matt and Lou for sharing our thoughts, and I'm going to hit disclosure, and we'll get out of here.

As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards, and it is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our advertising disclosure, please check out our show notes. Thanks for producer Kristi Waterworth and the rest of The Motley Fool team. For Lou, Matt, and myself, thanks for listening, and we'll chat again soon.

Lou Whiteman has positions in Axon Enterprise, GXO Logistics, and Shopify. Matt Frankel, CFP has positions in Amazon and Shopify and has the following options: short January 2027 $170 calls on Shopify. Tyler Crowe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends 3M, Amazon, Apple, Axon Enterprise, Global-E Online, Intel, Shopify, Sterling Infrastructure, and United Parcel Service. The Motley Fool recommends FedEx and GXO Logistics. The Motley Fool has a disclosure policy.