My 2 Favorite Stocks to Buy Now

Investors have become increasingly bearish on the market in recent days. A disappointing jobs report in early August led to massive declines in stocks, and news that Warren Buffett was drastically reducing huge positions such as Apple AND Bank of America, may not have increased investor confidence.

These sell-offs don’t mean some stocks can’t do well in the face of the crisis, and stocks have shown signs of recovery. Investors who still want to play the long game can take advantage of top e-commerce companies like MercadoLibre (MELIA 0.76%) AND Internet shop (STORE 1.09%).

MercadoLibre

When it comes to thriving in times of crisis, 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 tell by looking at MercadoLibre’s results. The e-commerce company reported a 20% increase in gross merchandise volume. Its strength in Brazil and Mexico offset weak sales in Argentina.

In addition, as many investors know, MercadoLibre operates a fintech business called Mercado Pago. It allows cash-based customers to make purchases on MercadoLibre and has expanded into fintech services for other businesses amid its huge success. The continued growth of this segment has improved the company’s total payment volume by 36% year-over-year.

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

This growing force generated $9.4 billion in revenue in the first half of 2024, up 39% from the same period in 2023.

Admittedly, operating expenses grew faster than revenues, and MercadoLibre showed it’s not immune to problems. It had to increase its bad debt provisions by 74% in the first two quarters of the year, which reduced operating income growth. Fortunately, net income still grew by 89% annually to $875 million, helped by lower currency losses and lower income tax costs.

However, that news was enough to send the stock up more than 40% over the past year, making it one of the few stocks trading near its 52-week high. With those gains, its price-to-earnings (P/E) ratio now stands at 67. While that may seem high, investors should remember that its U.S. counterpart Amazon For most of its history, the company’s shares have traded at a higher multiple.

In addition, MercadoLibre’s price-to-sales (P/S) ratio is 5, which is the lowest it has been in many years. Such indicators show that it is probably not too late to buy MercadoLibre, despite the rising share price.

Internet shop

Shopify approaches e-commerce from a different perspective. Instead of allowing merchants to use a large platform, it enables businesses of all sizes to run their e-commerce independently. The easy-to-use platform allows merchants without coding to set up and operate an e-commerce platform, and the tools offer significant flexibility in customizing the look and feel of your site.

In addition, Shopify offers an ecosystem that handles most of the additional responsibilities of a customer’s e-commerce operations. These can include handling payments, conducting email marketing, and managing inventory, regardless of whether sales occur online or offline.

In addition, with the launch of Shopify Plus, the company expanded beyond supporting small and medium-sized businesses to attract large companies as customers. This led to several unexpected collaborations. Shopify’s latest partnership with Objective enables its merchants to sell on the Target platform, expanding Target’s product line and giving merchants access to a major retailer.

Given Shopify’s partnership and improved technology, investors may not be surprised to see the company’s revenue in the first half of 2024 jump to $3.9 billion, up 22% from the same period last year. Shopify lost $102 million in the first half of the year, which includes a $171 profit in the second quarter. By comparison, its loss of $1.2 billion in the first half of 2023 was primarily due to a one-time impairment charge from the sale of its logistics business of $1.3 billion.

It appears that being free of such fees and making a profit on a quarterly basis is finally helping Shopify stock. Despite a significant pullback earlier this year, it’s up about 15% over the past 12 months.

Due to recent losses, Shopify currently has no P/E ratio. Still, the P/S ratio of 12 is close to a multi-year low for the stock and well below its historical average of 22. With profits returning and revenues growing rapidly, along with potential multiple expansions, Shopify has the potential to become a multibagger, even for new investors.

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