The global health crisis resulting from the COVID-19 coronavirus outbreak has sent many investors running for cover. The Dow Jones Industrial Average, the S&P 500, and the NASDAQ Composite each entered correction territory last week, losing more than 10% from their recent highs (as of this writing).
In their rush to get to the sidelines, some investors have resorted to selling both good companies and bad. Now, as a result of this wholesale panic selling, there are a number of high-profile technology stocks that are selling at a steep discount to their recent highs, giving investors a compelling opportunity to snap up shares at bargain basement prices.
Let's take a look at why MercadoLibre Inc. (NASDAQ:MELI), Amazon.com (NASDAQ:AMZN), and Shopify Inc. (NYSE:SHOP) should be on investors' radars right now.
MercadoLibre: A Latin American e-commerce and fintech powerhouse
As late as mid-February, shareholders were buying MercadoLibre stock at an all-time high, but it's currently trading down more than 12% — allowing investors to scoop up shares at a discount. The company, which provides e-commerce and payment services to online businesses and shoppers, was riding high after reporting blowout fourth-quarter results.
Revenue grew 57% year over year, and the company posted strong operating metrics, but the headliner was Mercado Pago — its payments business — which generated triple-digit growth across a variety of metrics.
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Total payment volume (TPV) — the total amount of payments processed — rose 63.5% year over year to $8.7 billion in U.S. dollars (USD), but grew by 99% in local currencies. The total number of payment transactions climbed 127% year over year to 285.5 million. This growth was driven by off-platform growth, as a growing number of unrelated e-commerce sites and brick-and-mortar retailers have adopted Mercado Pago's payment services. Off platform transactions grew 121% year over year in USD, but a massive 176% in local currencies, representing 78% of TPV growth and accounting for 55% of total payments during the quarter.
This could be just the beginning. MercadoLibre has been selling mobile point-of-sale (mPOS) systems — handheld payment devices — at low margins, helping generate rapid adoption by small- and medium-sized businesses in the region. Sales of these devices grew 126% year over year in local currencies, which will boost future payment metrics.
Investors can now get all this growth much cheaper than just three weeks ago.
Amazon: $1 Trillion market cap for a reason
It was only a month ago that e-commerce juggernaut Amazon.com reestablished its membership in the vaunted $1 trillion market cap club, yet now the stock is selling at a discount of about 10%. The company fell victim to the general market weakness, but not all investments are created equal.
Amazon showed the strength of its business by reporting robust fourth-quarter results, with revenue that grew 21% year over year, while earnings per share grew 7%. Both numbers easily surpassed expectations.
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CEO Jeff Bezos updated investors on the strength of its Prime member loyalty program for the first time in two years, saying it now boasts 150 million paid Prime subscribers, up from 100 million in early 2018. Anyone who has followed Amazon for some time knows that Prime members are also the company's most lucrative shoppers, spending about $1,400 per year, on average, a whopping 133% more than the $600 spent by nonmember customers, according to data from Consumer Intelligence Research Partners.
Let's not forget Amazon Web Services (AWS), its cloud computing operation, which is still the industry leader and grew 34% year over year in the fourth quarter while boasting juicy 26% operating margins.
Amazon has plenty of gas left in the tank, working to expand its one-day shipping, fulfillment services, and international operations. The company also has other catalysts, including its growing ecosystem of Alexa-powered Echo products, as ownership of these devices tends to increase customer engagement and boost sales.
With the pole position in the trend toward e-commerce and plenty of other growth catalysts as well, Amazon stock is a steal at these lower prices.
Helping small business join the e-commerce revolution
E-commerce platform Shopify enables merchants to join the e-commerce movement. The stock was also recently fetching all-time high prices, but has tumbled about 12% as of this writing. Yet in-the-know investors should be picking up shares in the fast-growing business before the market comes to its senses, as demonstrated by its recent results.
In the fourth quarter, Shopify reported revenue that grew 47% year over year. An important component of those results is the growing base of monthly recurring revenue, which grew 32% and now accounts for nearly 11% of total revenue.
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Both operating segments produced blockbuster results. Subscription solutions grew 37% year over year, as merchants flock to the platform, and Shopify revealed that more than 1 million merchants now call the software-as-a-service (SaaS) platform home. Merchant solutions jumped 53%, pushed higher by the ever-growing sales that are transacted on its site. Gross merchandise volume (GMV), which measures the value of goods sold on the platform, grew 47% year over year, topping $20.6 billion. The payments processed in conjunction with those sales grew to $8.9 billion, amounting to 43% of GMV.
Shopify's growth shows no signs of slowing. The company is actively expanding into international markets, adding new languages, and recently began to establish a fulfillment network, all in hopes of enabling the next generation of online entrepreneurs.
Of all these recommendations, Shopify is the riskiest of the bunch, as it plows all its profits back into future growth. At 27 times forward sales, it's by no means cheap, but investors have thus far been willing to pay up for the company's impressive top-line growth. That said, Shopify is at the forefront of the movement and now, savvy investors can buy get this fast-growing business at a discount.
In case you didn't notice
There's a common thread that connects each these companies: Each is a leader — in some way — in the continuing shift toward e-commerce. It's still early days in the trend toward online shopping, which represented just 14% of global retail last year. E-commerce sales are expected to take a greater piece of the retail pie in coming years, jumping to 22% of global retail by 2023, according to eMarketer. Additionally, in the ongoing health crisis, a larger group of consumers will remain home, which will cause an uptick in e-commerce orders, benefiting each of these digital platforms.
It's worth noting that the market volatility that has existed in recent days will likely continue until the coronavirus outbreak runs its course and there's simply no way to call a bottom to this gyrating market. That said, each of these companies represents a well-run business with a bright future. Over the coming months and years, investors who took advantage of the uncertainty and bought these stocks at discount prices will be glad they did.
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