Why Shopify Spent $450 Million on a Company No One’s Heard Of

Robots, artificial intelligence, and warehouse automation — all running at a loss.

| More on:

E-commerce technology powerhouse Shopify (NYSE: SHOP) recently announced it’s purchasing robotics and warehouse automation outfit 6 River Systems, adding the start-up’s capabilities to its own order fulfillment segment and jump-starting its logistics prowess. Shopify said it will pay $450 million for the company, which is projected to add just $30 million in revenue next year and $25 million in operating expenses this year. What gives?

What Shopify is getting

Perhaps it’s a sign of the times. Tech valuations are high at the moment, and as nutty as Shopify’s one-year forward price-to-sales valuation of roughly 15x on 6 River Systems might sound, it’s par for the course at the moment in the world of data, automation, and analytics services. Shopify itself is valued at 29 times trailing one-year sales — although a top line expansion of nearly 50% last quarter partially justifies the stratospheric multiple for this high-growth stock.

Image source: Getty Images.

Shopify’s move isn’t unprecedented. Amazon.com (NASDAQ: AMZN) bought Kiva Systems — a company similar to 6 River Systems — back in 2012 for $775 million. In fact, as Fool.com contributor Danny Vena points out, two 6 River Systems founders were executives at Kiva. That’s interesting.

Shopify CEO Toby Lutke explained: “Shopify is taking on fulfillment the same way we’ve approached other commerce challenges, by bringing together the best technology to help everyone compete. With 6 River Systems, we will bring technology and operational efficiencies to companies of all sizes around the world.”

But while Amazon eventually turned Kiva into Amazon Robotics to grow its own share of the burgeoning e-commerce industry, Shopify is likely taking a different approach. At least at the moment, Shopify’s mission is to empower other businesses with e-commerce technology — from the small mom-and-pop store and aspiring entrepreneur to the large and established business looking to make the migration to direct-to-consumer selling via the internet. Through Shopify Plus, large businesses using Shopify to start up and improve upon their digital selling capabilities have been fueling results in a big way. Thus, while Amazon went shopping to further develop e-commerce as the current leader of that industry, Shopify is disrupting it by making the technology available to everyone.

This isn’t the only recent Shopify deal

Earlier in the year, Shopify also acquired a small business-to-business (B2B) e-commerce company called Handshake for an undisclosed sum. Then, during its developer conference, it announced it was investing in a national network of fulfillment centers to help its customers keep up with Amazon and its other impossibly large peers with greater scale. While this was happening, the multitrillion-dollar U.S. B2B industry got yet another entrant in the form of Alibaba. Shopify is stitching together its tech with new logistics prowess to take on a big industry, led by some powerful players.

However, all of Shopify’s new parts pair together nicely, not as a marketplace but as a competitive alternative to Amazon’s various business services. Amazon has learned a lot at the expense of older retailers and leveraged it into highly profitable operating segments and technology; its AWS cloud computing platform is a case in point. Online retail may be by far Amazon’s largest department — at $31.1 billion in the second quarter of 2019 alone, a 14% year-over-year increase — but its operating profit margin is in the single digits. By contrast, AWS generated a 25% operating margin on revenue of $8.38 billion in the second quarter.

So why 6 River Systems? It’s all about luring in retailers and business suppliers to the larger Shopify ecosystem, without said businesses having to worry about an in-house retailing operation run by Shopify. It could be a real pull for companies in need of an upgrade to their online presence, as well as those in the Amazon sandbox competing with the company’s formidable selling enterprise. It’s too soon to tell whether the investment will pay off. However, in a big industry that’s only getting bigger, Shopify’s past execution suggests investors should be paying attention.

Should you invest $1,000 in Amazon right now?

Before you buy stock in Amazon, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Amazon wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Nicholas Rossolillo owns shares of Alibaba Group Holding Ltd. and Shopify. The Motley Fool owns shares of and recommends Amazon and Shopify. The Motley Fool has a disclosure policy.

More on Tech Stocks

Canadian Dollars bills
Tech Stocks

The Smartest Under $10 Stock to Buy With $2,300 Right Now

Blackberry stock remains undervalued as it's not reflecting the company's strong position in the rapidly growing connected car industry.

Read more »

investor looks at volatility chart
Tech Stocks

1 TSX Down 22% to Buy and Hold as Volatility Persists

Shopify stock has had its fair shares of ups and downs, but right now this rebounding tech stock looks like…

Read more »

Person uses a tablet in a blurred warehouse as background
Tech Stocks

My Top 2 TSX Tech Stocks: Smart Bets for Canadian Technology Exposure

Here's why Kinaxis (TSX:KXS) and Shopify (TSX:SHOP) remain two of my top TSX tech stock picks in this current market,…

Read more »

semiconductor manufacturing
Tech Stocks

The Smartest Small-Cap Stock to Buy With $900 Right Now

With its strong foothold in high-growth sectors, this small-cap stock can navigate economic uncertainties well and deliver massive gains.

Read more »

A shopper makes purchases from an online store.
Tech Stocks

If I Could Only Buy and Hold a Single Growth Stock, This Would Be It

Despite strong buying on positive investor sentiment, this healthy growth stock still trades at a discount.

Read more »

Car, EV, electric vehicle
Tech Stocks

Blackberry: Buy, Sell, or Hold in 2025?

Blackberry is a high risk, but potentially high reward stock suitable for some torque in a well-diversified portfolio.

Read more »

stocks climbing green bull market
Tech Stocks

Why CAE Stock Popped 9% After Earnings

Few Canadian stocks offer the stability and growth as this one, especially after earnings.

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

The Smartest AI Stock to Buy With $2,200 Right Now

This AI stock is posied to grow revenue and free cash flow at an enviable rate through 2028. Is the…

Read more »