Nasdaq bear market: 2 great growth stocks to buy without hesitation in September
The Nasdaq Composite The bulk of the past six months has been spent in a bear market, and the tech-heavy index is currently at 28% of its highs. Losses of this magnitude can be very worrying, but the best thing any investor can do is maintain a long-term mindset. Eventually, another bull market will come and the Nasdaq will rebound. But there are plenty of high-quality bargain-priced stocks to consider in the meantime.
PayPal (PYPL -1.65%) And the free market (milli -0.34%) They are two screamers buy in September. Here’s why.
1. PayPal: The most accepted digital wallet in North America and Europe
PayPal has struggled over the past year, as it battled headwinds related to a loss ebayChallenging business and macroeconomic environment. As a result, revenue rose just 9% in the second quarter, and the company posted a GAAP loss of $0.29 per diluted share. But the headwinds related to eBay and high inflation are ultimately temporary, and the long-term investment thesis remains unchanged: digital payments are becoming more popular, and PayPal is the most accepted digital wallet in North America and Europe.
Moreover, this popularity does not fade. PayPal was the most downloaded financial app worldwide in the first half of 2022, according to Apptopia. Even better, studies have shown that PayPal boosts payment conversion rates by 34% compared to other digital wallets, and this value proposition has helped it establish partnerships with several prominent merchants. Notably, paying with Venmo will continue Amazon later this year.
More broadly, PayPal operates a two-pronged payments platform – providing financial services to both merchants and consumers – and this gives it an edge over traditional processors. For example, PayPal could theoretically prevent fraud more effectively because it has access to data on both sides of most transactions. It can also increase merchant sales by offering personalized shopping deals to digital wallet users. In fact, PayPal plans to double this feature in the second half of the year by redesigning the shopping center in its digital portfolio.
On this note, PayPal has refocused its growth strategy around three product categories where it has a massive competitive advantage – PayPal and Venmo digital wallets, PayPal Checkout, and Braintree (a more customizable checkout solution for large e-commerce businesses) – and this shift in focus is paying off. Already. In the second quarter, PayPal continued to gain market share across those categories, and CEO Dan Schulman said revenue growth accelerated to “north of 14%” in July.
Going forward, PayPal still has a lot of room to grow. It puts its routable market at $110 trillion, and its business should benefit greatly from a secular shift toward online shopping and digital payments. For example, the number of digital wallet users will double between 2021 and 2025, according to Juniper Research, and digital wallets will continue to participate on exit (in both physical and digital settings) during that time period.
Currently, the shares are trading on the cheap 4.1 times sales — an absolute bargain compared to the three-year average of 24.6 times sales. This is why now is the time to buy this growth stock.
2. MercadoLibre: The most popular e-commerce marketplace in Latin America
MercadoLibre is a giant in Latin America. It operates the largest online marketplace in the region, and ranks number one in the market in all the major countries in which it operates. Building on this success, its fintech platform Mercado Pago is the third most popular digital wallet in Latin America.
MercadoLibre has consolidated its strong position in the market with value-added services such as logistics, finance and digital advertising. These products amplify the network effects created by commerce and fintech platforms, and make both ecosystems more stable. For example, logistics company Mercado Envíos handles approximately 91% of freight volume, and same-day or next-day delivery accounted for 55% of that volume in the second quarter. Traders simply cannot do this on their own.
Financially, MercadoLibre delivered another strong performance in the second quarter, despite macroeconomic headwinds. Revenue rose 52% year over year to $2.6 billion, but earnings rose 77% to $2.43 per diluted share. This rapid profit growth is partly due to operational efficiencies driven by greater scale in its businesses, and exceptionally strong expansion of high-margin services (such as lending, credit cards) in its fintech business. But MercadoLibre has only scratched the surface of a huge market opportunity.
For example, the MercadoLibre market generated $28 billion in sales last year, but e-commerce sales in all relevant countries will reach $260 billion by 2026, according to Statista. Mercado Pago generated $2.4 billion in revenue last year, but payments revenue in Latin America will reach $190 billion by 2025, according to Boston Consulting Group.
MercadoLibre clearly has plenty of room for growth, and with the stock trading at 4.8 times sales — a bargain compared to the five-year average of 13.2 times sales — now is a great time to buy that stock.
John Mackie, CEO of Whole Foods Market, an Amazon company, is a member of The Motley Fool’s Board of Directors. Trevor Jennewine holds positions at Amazon, MercadoLibre and PayPal Holdings. Motley Fool has and recommends positions at Amazon, MercadoLibre and PayPal Holdings. Motley Fool recommends eBay and recommends the following options: Short October 2022 calls at $50 on eBay. Motley Fool has a disclosure policy.