2 growth stocks to buy that could be massive winners in the long run

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Some growth stocks have not followed the bullish trend of the stock market over the past year. Some companies that experienced increased demand during pandemic-related restrictions last year have shown slower growth this year, which has contributed to the underperformance of stock prices. But buying stocks of big brands when expectations are low is a good strategy to beat the average market return.

Wayfair (NYSE: W) and Free Mercado (NASDAQ: MELI) are two leading ecommerce stocks that could be huge winners from current price points. Here’s why investors should ignore the noise and consider buying these two stocks today.

Image source: Getty Images.

1. The fair

Wayfair is a leading online home goods platform, with over 29 million customers and $ 14 billion in revenue over the past 12 months. The acceleration in orders last year pushed the stock to over $ 300 a share, but tough year-over-year growth comparisons and supply shortages put pressure on the market. growth in recent quarters, causing the share price to fall 23% in the past three months. . However, Wayfair is still well positioned to capture market share as more consumers shop online in the $ 800 billion housewares market.

Wayfair has a few key advantages to achieving its goal. It has a bespoke website for buying home goods, a wide selection of products and warehouses designed to handle bulky items to process orders in a timely manner. These features set Wayfair apart from major retailers like Amazon. Revenue has more than doubled in the past three years, but recent headwinds could continue to put pressure on the company’s growth.

In the past quarter, more consumers shifted their spending from e-commerce to entertainment and travel. Wayfair is also experiencing delays in receiving more inventory, causing the company to run out of sales. Revenue was down 18% year-on-year in the third quarter due to these issues, but they are temporary issues that do not affect Wayfair’s long-term growth path.

The good news is that falling stock prices give patient investors the opportunity to buy stocks at a discount. The share’s price-to-sell ratio has fallen from above 2 to below 1.6 in recent months, presenting a more attractive entry point.

It’s also a bonus that co-founders Niraj Shah and Steve Conine own almost 50% of the Class B common stock. As shareholders who think like real business owners, Shah and Conine don’t focus. on short-term results, but on making decisions that put Wayfair in the best position to tackle its long-term addressable market. The business has the makings of a long-term winner, but investors must be prepared to be patient as Wayfair faces post-pandemic headwinds.

A person using a cell phone.

Image source: Getty Images.

2. MercadoLibre

MercadoLibre is building a one-stop-shop for e-commerce in Latin America, one of the fastest growing e-commerce markets. It offers mobile payments, credit, shipping, and an online marketplace with 335 million live listings at the end of the third quarter. Out of all of these services, it ended the last quarter with 78 million unique active users, but that’s a fraction of the 635 million people who live in the region.

MercadoLibre has enormous long-term potential. The stock price has risen 637% in the past five years, but the stock has fallen sharply in recent months.

Investors discount the company’s future profits. All the services offered by MercadoLibre outside of its core market activity widens the competitive gap of the company and at the same time improves profitability. In the third quarter, the operating margin improved to 8.6% from 7.4% in the previous year quarter.

Margins will likely continue to increase over the long term. Before heavy marketing and technology spending to support growth over the past five years, MercadoLibre generated an operating margin of around 30% a decade ago, which is more in line with its U.S. counterparts like eBay and Pay Pal.

The stock price has fallen 37% in recent months, bringing its price-to-sell ratio to its lowest level since the March 2020 stock market crash. This fintech stock is expected to generate massive returns over the long term, and the recent decline in the share price presents an attractive value point to embark on.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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