The last few years have been very rewarding for patients Apple (AAPL -0.33%) shareholders. The stock is up more than 300% since its pandemic-induced low in early 2022, and is up 700% over the past decade. Credit the iPhone and Apple’s App Store for most of this gain.

The fact is that revenues haven’t really changed much since the start of 2023. And without the continued growth of its services arm, they might even have fallen. Regardless, the stock has soared, largely because Apple’s foray into artificial intelligence is expected to bear fruit.

Maybe it will. However, given all of the company’s risks and challenges, it might be wiser to avoid frothyly priced Apple shares for now and instead dive into something with more promising upside potential. E-commerce technology and services provider Shopify (SHOP 2.95%) fits the bill well.

Why not Apple?

Don’t get me wrong. Apple is far from doomed. At the very least, it’s possible to create the most popular smartphone in the world. The company’s services arm, still growing, further strengthens the bullish case.

However, there is an undeniable reality that no shareholder can afford to ignore. That is, Apple’s iPhone business stagnate as measured by unit sales as well as revenue.

iPhone sales vary throughout the average year. Demand increases when updated models are launched in September, then skyrockets in the fourth calendar quarter thanks to Christmas gifts and the purchase of a full fiscal quarter. Its iPhone business is so spotty, in fact, that it’s hard to determine whether that business is actually growing or not. The chart below is helpful in this regard, plotting average iPhone revenue and unit sales over four quarters. As the image clearly shows, Apple’s smartphone business has indeed stagnated since the start of 2022.

Data source: Apple Inc. and IDC. Table by author. Revenues are in millions. Unit deliveries number in the millions.

It’s not necessarily disastrous. Once again, it’s Apple. It is one of the world’s largest companies for good reason.

Given that the iPhone still represents about half of Apple’s revenue, this stagnation should not be ignored. At one point, Apple will We need to start generating measurable and meaningful revenue growth.

New AI-enabled iPhones could help, but there’s no guarantee they’ll have a major bullish impact. After all, online tools comparable to Apple Intelligence are available to users of other smartphone brands, although the artificial intelligence the work performed is not managed directly from these other devices.

Why Shopify?

So what does Shopify have that Apple doesn’t? Real growth – now and into the foreseeable future.

If you’re not familiar with it, Shopify helps merchants build their own e-commerce websites. From online shopping carts and payment processing to internet marketing and customer management tools, Shopify’s suite of solutions means it’s a turnkey option for almost any type of business. businesses.

Businesses use these tools, of course. The company’s technology facilitated the sale of goods and services worth $67.2 billion in the three months ending in June, up 22% year-over-year. Indeed, the company has been growing at such a pace for several years now and is expected to continue to do so for at least the next few years.

Data source: StockAnalysis.com. Table by author.

However, these bullish outlooks may ultimately underestimate what lies ahead in terms of growth, as well as the longevity of that growth.

Simply put, the e-commerce industry is not just growing. This is also evolving. While online shopping malls like Amazon And eBay have served their original purpose quite well, many merchants and manufacturers are now better served by doing their own work, cultivating relationships with customers directly instead of relying on online intermediaries who could destroy or commandeer those relationships in the process. future.

But that’s only half the bullish argument. The other half is about how much growth awaits the entire e-commerce industry. According to its latest study, the Census Bureau reports that only about 16% of retail sales in the United States – where Shopify does most of its business – are done online. The remaining 84% are still made in-store, leaving them up for grabs. The key is simply creating the right appeal for these buyers, moving them from offline to online.

To this end, market research firm Precedence Research estimates that the global e-commerce industry is poised to grow at an average annual rate of just under 15% through 2034, with this growth driven by established direct-to-consumer brands with the most revenue. earn by building their own online presence.

The thing: Unlike Apple’s stock, which just hit a new all-time high, Shopify’s stock is still well below their peak at the end of 2021, despite their significant gain from the 2022 low.

At least be pragmatic

This will not always be the case. There will come a time when Apple becomes a hot stock again, just as there will come a time when Shopify stock presents too much risk for its potential reward.

But now is not the time. Right now – thanks to a recent but unsupported uptrend – Apple is arguably one of the market’s most overvalued stocks, while Shopify is one of its most underrated names. Take advantage of this opportunity while you can, and perhaps more importantly, don’t insist on owning the most popular stocks in the world just because they’re popular. Nothing lasts forever, for better or for worse.