Stock market rally could start in October: 2 great growth stocks to buy now and hold for the long term

October has historically been a good month for investing money in the stock market. The S&P500 According to Bespoke Investment Group, it has risen by at least 10% 61 times since World War II, and almost a third of those gains began in October.

One example is the bear market that began on January 3, 2022 and ended on October 12, 2022. During the subsequent bull market, the S&P 500 index increased by over 60%. History suggests that growth momentum could pick up in October and beyond, due in part to holiday spending.

Past performance is never a guarantee of future profits, but Shopify (STORE -1.91%) AND Uber technologies (UBER -1.23%) they are a profitable long-term investment, regardless of what happens next month. Here’s why.

Shopify: The market leader in e-commerce software

Shopify provides commerce software and services for businesses of all sizes. The platform enables sellers to manage sales across offline and online channels, including social media, marketplaces and custom websites. Shopify also offers adjacent commerce solutions for marketing, payments, and logistics. This turnkey approach has helped the company secure leadership in e-commerce and omnichannel commerce software.

Shopify initially prioritized small and medium-sized businesses, but is engaging larger brands with Shopify Plus and Commerce Components. The former is a complete commerce platform designed for enterprises, and the latter allows enterprises to adapt individual elements of the Shopify commerce stack. Both include wholesale commerce tools that expand Shopify’s addressable market beyond retail.

Shopify looked strong in the second quarter. Revenue increased 21% to $2 billion, including a 4 percentage point decline driven by the sale of its logistics business. Meanwhile, non-GAAP (adjusted) earnings increased 85% to $0.26 per diluted share. CEO Harley Finkelstein told analysts: “More and more merchants around the world trust Shopify’s unified commerce operating system to power growth and simplify complex operations.”

Importantly, the company has made progress in retail, wholesale and international markets, three strategic growth vectors. In the second quarter, offline gross merchandise volume (GMV) increased 27% and wholesale GMV increased 140%, both exceeding total GMV growth of 22%. Meanwhile, the number of international sellers using Shopify has increased by 30%.

Wall Street expects profits to grow 45% annually over the next three years. This makes the current valuation of 82 times earnings seem reasonable. Regardless of whether the stock market rally begins in October or not, I think investors who buy a small position in Shopify today will be happy with their decision in five years.

Uber Technologies: The leader in the ride-sharing market

Uber divides its business into three categories: its mobility segment connects passengers with transportation, its delivery segment connects consumers with local grocery stores and restaurants, and its freight segment connects shippers with carriers. Uber operates the largest ride-sharing platform in the U.S. by revenue and the second-largest food delivery platform, according to Bloomberg.

What sets this company apart is its ability to offer ridesharing and delivery services through a single platform. Uber can encourage consumers and drivers on both sides of its ecosystem to connect with the other side, and its cross-promotional efforts are paying off. According to the company’s presentation, 22% of first mobility trips are made using a delivery app, and 31% of first mobility deliveries are made using a mobile app.

Uber has another important advantage in the form of its proprietary data. The company deeply understands users’ tastes and preferences while providing ride-sharing and delivery services, and then uses that information to reach consumers with relevant advertising. User data also creates a network effect that helps Uber better predict demand and route drivers over time.

Uber announced solid financial results for the second quarter. The platforms’ monthly active users increased by 14% to 156 million and the number of trips increased by 21% to 2.7 billion, which means users are engaging more frequently. Meanwhile, revenues increased 16% to $10.7 billion, led by strong growth in mobile device sales, and GAAP earnings increased 161% to $0.47 per diluted share.

Wall Street expects Uber’s profits to grow 48% annually over the next three years. This consensus makes the current valuation of 84 times earnings seem reasonable. Investors should feel comfortable buying a small position in Uber at the current price, provided they plan to hold their shares for at least three to five years.