The 2 favorite stocks to buy right now

In recent days, investors have become increasingly pessimistic about the market. A disappointing jobs report in early August led to massive declines in indexes and news that Warren Buffett had dramatically reduced massive positions such as Apple and bank of america, it may not have boosted investor confidence.

That selloff doesn’t mean some stocks can’t perform well during the downturn, and stocks have shown signs of recovery. Investors who still want to go long could take advantage of top e-commerce companies such as MercadoLibre (NASDAQ: MELI) and Shopify (NYSE: STORE).

MercadoLibre

When it comes to thriving in a downturn, perhaps no stock stands out more than MercadoLibre. It operates in Latin America, a region that has long suffered from political and economic volatility. However, you wouldn’t know it if you looked at MercadoLibre’s results. The e-commerce company saw a 20% increase in gross merchandise volume. Its strength in Brazil and Mexico offset remaining sales in Argentina.

Furthermore, as many investors know, MercadoLibre operates a fintech business called Mercado Pago. It allows cash-based consumers to buy from MercadoLibre and has expanded into fintech services for other companies on the back of its massive success. The continued growth of this segment improved the company’s total payment volume by 36% year-over-year.

In addition, Mexico continues to be a focal point for its logistics and fulfillment arm, Mercado Envios. The segment introduced same-day and next-day shipping in Latin America. Now, it has opened a fulfillment center in Texas to bring American goods to the Mexican market, which should further increase the company’s market reach.

This growing force generated revenue of $9.4 billion for the first half of 2024, a 39% increase compared to the same period in 2023.

Of course, operating expenses have grown faster than revenue, and MercadoLibre has shown it’s not immune to struggles. It had to increase allowances for doubtful accounts by 74% in the first two quarters of the year, reducing operating income growth. Fortunately, net income was still up 89% year-over-year to $875 million, helped by lower foreign exchange losses and reduced income tax expense.

Still, the news was enough to push the stock price up more than 40% over the past year, making it one of the few stocks trading near its 52-week high. With these gains, the price-to-earnings (P/E) ratio is now at 67. While that may sound high, investors should note that its U.S. counterpart Amazon it has traded at a higher multiple for much of its history.

Additionally, MercadoLibre’s price-to-sales (P/S) ratio is 5, a multi-year low. Such numbers show that it’s probably not too late to buy MercadoLibre, despite the stock price rally.

Shopify

Shopify approaches e-commerce from a different angle. Instead of enabling merchants through a large platform, it empowers businesses of all sizes to conduct e-commerce independently. Its easy-to-use platform allows merchants with no coding knowledge to set up and operate an e-commerce platform, and the tools provide considerable flexibility to customize the look and feel of a site.

In addition, Shopify offers an ecosystem that addresses most of the ancillary concerns involving its customers’ e-commerce operations. This can include handling payments, conducting email marketing and managing inventory, whether sales are online or offline.

Additionally, with the launch of Shopify Plus, the company expanded beyond its support for small and medium-sized businesses to attract large companies as customers. This led to some unexpected collaborations. Shopify’s recent partnership with Aim allows its merchants to sell on Target’s platform, expanding Target’s product line and giving merchants exposure to a major retailer.

Given Shopify’s collaborations and improving technology, it may not surprise investors that its revenue for the first half of 2024 rose to $3.9 billion, up 22% compared to the same period last year. last year. Shopify lost $102 million in the first half of the year, which includes a profit of $171 in Q2. That compares with a loss of $1.2 billion in the first half of 2023, mainly caused by a one-off impairment charge on the sale of the logistics business of $1.3 billion.

It looks like being free of such fees and becoming profitable quarterly is finally helping Shopify stock. Despite a significant pullback earlier this year, it is up about 15% over the past 12 months.

Due to recent losses, Shopify does not currently have a trailing P/E ratio. Still, the P/S ratio of 12 is near multi-year lows for the stock and well below the historical average of 22. As profits rebound and rapid revenue growth continues, along with possible multiple expansions, Shopify could become a multibagger, even and for new investors.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Will Healy has positions in MercadoLibre and Shopify. The Motley Fool has positions in and recommends Amazon, Apple, Bank of America, MercadoLibre, Shopify, and Target. The Motley Fool has a disclosure policy.

The 2 Favorite Stocks to Buy Right Now was originally published by The Motley Fool