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2 growth stocks to buy and hold during any market downturn

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Growth stocks have borne the brunt of the market downturn in recent months. Given a performance that saw most of their values ​​wiped out, many investors may understandably want to stay away from these stocks.

However, upon closer examination, the long-term growth stories of some of these companies remain intact, indicating that some stocks may be making a comeback. And since they’re selling at huge discounts, that probably means they’re buying, above all in the current environment. Internet retail and direct marketing stocks, such as MercadoLibre (MELI -7.38%) and Shopify (STORE -6.12%)could become two such comeback stories.

MercadoLibre

MercadoLibre started as a marketplace where Latin American businesses could sell goods online. Moreover, like its e-commerce counterpart Amazonit leveraged this venture to drive further growth from related businesses.

Since Latin America is a predominantly cash-based and heavily unbanked society, it has pioneered fintech solutions through Mercado Pago to enable payments. It has further expanded its ecosystem by offering these solutions to other companies. Additionally, e-commerce presents logistical challenges, which is why he launched Mercado Envios, which can store, package, and ship goods for his customers.

This e-commerce ecosystem has anchored MercadoLibre in Latin America. It provides a competitive advantage even when competitors such as Sea Limited and Amazon have entered parts of this market. Investors should also note that it is thriving amid the challenges of inflation. Brazil, which accounted for around 56% of its sales in the first quarter of 2022, is now facing double-digit annual inflation, while MercadoLibre’s home country Argentina is facing inflation that has exceeded 50% in recent years.

However, this price hike has not slowed the company down. Revenue for the first quarter of 2022 jumped 67% to $2.2 billion from year-ago levels. This led to quarterly revenue of $65 million, compared to a loss of $34 million 12 months prior. And even if it can’t sustain those levels of growth, analysts estimate that MercadoLibre can achieve 47% revenue growth for this year.

The drop in growth stocks hit MercadoLibre as it fell more than two-thirds from its 52-week high. Still, that brings its price-to-sales (P/S) ratio down to four.

This may not match Amazon’s P/S ratio, which has dropped to around two. However, MercadoLibre’s sales multiple has not been so cheap since the Great Recession. Given the company’s potential to change the nature of e-commerce, fintech and shipping in Latin America, MercadoLibre could present a unique opportunity for investors, businesses and consumers in its home region.

Shopify

Shopify is a platform that allows businesses to launch their own e-commerce businesses. Of course, many companies, such as Wix and square spacecompete in this area, at least on the software side.

However, Shopify has stood out by offering robust tools and an ecosystem that transcends the software business. Shopify Payments can accept money without third-party payment providers. Additionally, its POS system allows inventory management, including unsold inventory through a Shopify site. Additionally, Shopify has built a fulfillment network that can store, package, and ship a business’s goods.

According to BuiltWith, Shopify has achieved a 31% market share among e-commerce platform providers in the United States. This growth allowed it to build a market cap of $39 billion, surpassing that of the e-commerce pioneer. eBaywhich supports a market capitalization of $24 billion.

Shopify also continues to grow, with first-quarter revenue of $1.2 billion. This was 22% higher than levels a year ago. Granted, that’s a slowdown from 2021, when revenue grew 57% year-over-year. Additionally, with operating expenses up 67% in the first quarter, the company lost $1.5 billion versus a profit of $1.2 billion in the first quarter of 2021.

However, Shopify has invested heavily in growing its business and has struggled with lower margins in some of its segments. Additionally, analysts expect 2022 revenue to recover somewhat, reaching around 27%.

Additionally, as Shopify stock fell more than 80% from its 52-week high, its P/S ratio fell to around eight. While still higher than Wix or Squarespace, both of which trade at less than three times sales, Shopify’s sales multiple is at its lowest level in more than six years. Such a valuation, along with rising revenue and business investment, could make Shopify one of the most compelling buys in e-commerce.