The bear market for tech stocks has changed perceptions on several levels, especially around valuations. Shareholders who consistently tolerated P/E ratios above 100 last year sold their most expensive shares.
However, this does not necessarily mean that growth has slowed for all companies. In fact, some consumer-oriented companies continue to grow at a rapid pace. Thanks to falling stock prices, investors can now buy some of the most expensive fast-growing stocks at a substantial discount. Those expecting lower valuations should consider more seriously Airbnb (ABNB -0.27%), MercadoLibre (MELI 0.43%)and Shopify (STORE -0.78%).
Airbnb
Airbnb is not the only vacation rental platform, nor an industry pioneer. However, he has expanded the scope of these rentals by renting out shared spaces and even boutique hotel rooms. The first mover, Vrbo, owned by Reserve creditsdoes not allow short rentals on shared spaces.
Additionally, Airbnb may use AI and machine learning to better personalize listings. Customers can choose from around 4 million properties around the world. This means they can turn to it for a weekend getaway or a dream holiday abroad. And because Airbnb is only responsible for the rental, it can add listings without the burden of building costs.
With this approach, the company recorded revenue of $3.6 billion in the first half of 2022, up 62% from the same period in 2021. Meanwhile, interest expense rose from $428 million to just $13 million. Thus, Airbnb earned $360 million in the first six months of the year, compared to a loss of $1.2 billion in the first half of 2021.
At current prices, Airbnb has lost more than half of its value since peaking in early 2021. Yet its price-to-sales (P/S) ratio has fallen to nine, near record lows and well below the peak. of the P/S ratio of 36 at the start of 2021. While that may still seem expensive, the valuation, rapid revenue growth and relative ease of adding spaces could make it the right time to buy Airbnb.
MercadoLibre
MercadoLibre has built a competitive advantage by becoming the Amazon, PayPal, and Shopify from Latin America. Founded in 1999, it has developed pioneering status among Latin American e-commerce companies.
As a cash-based region, e-commerce was out of reach for many Latin American residents. The company pioneered fintech, offering solutions through Mercado Pago that it then made available outside of the company. In some of its countries, it launched Mercado Envios to provide packaging and shipping solutions to many of its customers.
These segments have further strengthened MercadoLibre in Latin America, enabling it to withstand competitive threats from Amazon and the Sea Limited e-commerce branch, Shopee.
This ecosystem generated more than $4.8 billion in revenue in the first six months of 2022, an increase of 57% over the same period in 2021. It also generated a net income of $188 million during this period, compared to $34 million during the same period. in the previous year. Lower growth in the cost of revenue and higher amounts of non-core revenue offset the rapid increase in operating expenses.
Despite rising profits, MercadoLibre is trading at a discount of almost 60% from its all-time high. Additionally, the P/S ratio of five is well below the 25-sales multiple at the end of 2020. With revenue growth remaining robust, it may be time to consider the e-commerce companygiven its low valuation.
Shopify
Shopify is far from the only e-commerce platform provider. However, it has become the #1 platform in the US, according to Oberlo, thanks to its comprehensive offerings. Shopify offers many tools to help customers customize their marketplaces. His research also revealed that slower transactions meant fewer sales, so he emphasized speed to stand out.
Plus, unlike most peers, it has ventured beyond software to expand its ecosystem. Offerings such as Shopify Payments and funding through Shopify Capital have integrated it into fintech. He also took an industrial orientation by entering the field of production. This arguably means that it has transcended most of the competition and is now in closest competition with Amazon.
Its revenue of $2.5 billion for the first two quarters of 2022 is up 19% from the same period last year. Furthermore, he returned to a net loss, losing $2.7 billion from a profit of $2.1 billion during the same period in 2021. Yet the investments in his business make that loss more forgivable.
Amid this loss and bear market, Shopify has fallen 84% from its 52-week high. Still, its P/S ratio fell to seven, a steep discount from early 2021, when some investors paid more than 60 times sales for Shopify. As it offers more support for e-commerce, Shopify should eventually regain its peak and enjoy a bright future.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. will heal has positions in MercadoLibre, PayPal Holdings and Shopify. The Motley Fool owns and recommends Airbnb, Inc., Amazon, Booking Holdings, MercadoLibre, PayPal Holdings, Sea Limited and Shopify. The Motley Fool recommends the following options: $1140 January 2023 Long Calls on Shopify and $1160 January 2023 Short Calls on Shopify. The Motley Fool has a disclosure policy.
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