Jhe market has been a tough place for investors lately, especially technology stock shareholders. It always hurts to see your portfolio in the red day after day, but long-time investors know that it can be a good time to add quality companies to your portfolio.
We asked three veteran investors and Motley Fool contributors to highlight a stock that has sold off significantly but now looks like a great opportunity. They came with MercadoLibre (NASDAQ: MELI), PayPal (NASDAQ: PYPL)and DocuSign (NASDAQ: DOCU).
Image source: Getty images.
MercadoLibre – Down 46%
Danny Vena (MercadoLibre): There has been a major correction that has plagued tech stocks since mid-November, with the Nasdaq Composite Index briefly slipping into bearish territory this week. As a result, Wall Street offers a long list of blue-chip tech companies at discounted prices. History suggests this could present a huge opportunity for savvy investors, assuming they have the courage and resources to act.
MercadoLibre is one such stock. Although the company is not a household name in the United States, you would be hard pressed to find online shoppers unfamiliar with MercadoLibre’s leading e-commerce and fintech platform in its home market of America. Latin.
Given that the stock has lost nearly half its value in just a few months, you might suspect that there are underlying issues with the company’s business model or its growth, but nothing could be more. far from the truth. In the fourth quarter, MercadoLibre reported net revenue of $2.1 billion, up 74% year-over-year in local currencies. While that’s impressive in itself, consider this: This growth comes on top of the 149% gains recorded in the prior year quarter.
Revenue from the company’s e-commerce business grew 67% year over year, an impressive feat in the face of record competition. Growth within the fintech business was even more robust, with revenue jumping 81% on top of triple-digit gains in the prior year quarter. Gross merchandise volume (GMV) and gross payment volume (GPV) which set quarterly records for the company contributed to the impressive gains.
Although sales growth is more moderate than the same period last year, it is impressive given that MercadoLibre does not have the pandemic-related tailwinds driving its growth. Rather, it’s the company’s sticky ecosystem that’s fueling the current results.
While e-commerce and payments are MercadoLibre’s daily bread and butter, a large and growing list of ancillary services keep customers and merchants coming back for more. This includes website building and maintenance, fulfillment and logistics, shipping and cross-docking, working capital loans, consumer credit, digital wallet, cryptocurrency transactions , etc
One of MercadoLibre’s main growth drivers is payments. Mercado Pago, the company’s digital payment solution, has been so successful on its platform that other online merchants have started to adopt it for their own customers. He then made the leap to brick and mortar establishments and never looked back. In the fourth quarter, off-platform payments jumped 97% year-over-year, bringing more brick-and-mortar retailers into the fold.
Finally, MercadoLibre has never been cheap using traditional valuation metrics. That said, the stock is currently selling at a price-to-sales ratio below 8. To give that context, MercadoLibre stock hasn’t been so heavily discounted since early 2016, marking its lowest valuation in six years.
Investors would do well to take a slice of this Latin American e-commerce and fintech central while they are on sale. History suggests that the opportunity to get MercadoLibre at this price won’t last long.
Image source: Getty Images.
PayPal — Down 65%
will heal (PayPal): Fintech pioneer PayPal has struggled over the past year. In addition to a widespread sale of technology growth stocks, the end of its privileged relationship with the former parent company eBay weighed heavily on profits. Additionally, a shift in focus from growing customers to better monetizing its current customer base appeared to unsettle investors.
However, separation from eBay has become a huge advantage for PayPal. Despite PayPal’s decline, its market capitalization is almost four times that of its former parent company. Moreover, despite the focus on its current customers, it still expects to add between 15 and 20 million new users to its active customer count of 426 million this year.
Additionally, PayPal has positioned itself to better monetize its current customer base. The Venmo app has reached a user base of over 83 million and secured deals to enable Amazon and Roku customers to pay with Venmo, which increases the usability of the application. Additionally, its Honey integration into PayPal and Venmo could help further monetize the user base by offering discounts to customers.
Such measures are boosting revenue, which stood at $25.4 billion in 2021, an 18% increase from year-ago levels. Additionally, net income fell less than 1% over the same period to just under $4.2 billion as lower net gains on strategic spending weighed on profits.
But despite stagnating incomes, financial projections hold out hope for a recovery. The company forecasts a 15% to 17% increase in revenue in 2022, and analysts predict double-digit earnings growth in 2023. Additionally, its price-to-earnings (P/E) ratio fell to 30, from 75. in July. This probable drop in prices in the short term challenges for the stock, contributing to make PayPal stocks a purchase.
Image source: Getty Images.
DocuSign – Down 74%
Brian Wither (DOCU): It has been two years since the United States began to shut down due to the first cases of COVID-19. As companies scrambled to allow their employees to work remotely, DocuSign was adopted to ensure that business processes could continue without physical, in-person paper signatures.
A lot has happened since then. The company more than doubled its revenue and its enterprise and commercial customers, and nearly doubled the number of customers paying over $300,000 in annual contract value (ACV). It has become much more efficient and operating cash flow has more than quadrupled. Despite all of these incredible gains, the stock is trading 74% off its peak and at levels close to where it was in March 2020.
|
Metric |
FY2020 |
FY2021 |
FISCAL YEAR 2022 |
Annual change |
Change over 2 years |
|---|---|---|---|---|---|
|
Income |
$974 million |
$1,453 million |
$2,107 million |
45% |
116% |
|
Companies and commercial customers |
75,000 |
125,000 |
170,000 |
36% |
126% |
|
> $300,000 VAC customers |
437 |
599 |
852 |
42% |
95% |
|
Operating cash flow |
$116 million |
$297 million |
$506 million |
70% |
336% |
Source: DocuSign Investor Presentation. Table and calculations by the author.
With this stock price, one can only assume that these incredible results are ignored and the stock is dragged down by global events and an overweight on its 18% year-on-year growth projection. another for the coming year. This gives investors a great opportunity to buy an essential catalyst for today’s business operations. Let me explain why.
The company more than doubled the number of corporate and commercial customers, which account for 88% of its revenue. These 95,000 new customers over the past two years are just starting to use this e-signature platform and are only beginning to leverage the full capabilities of the software. With net dollar retention ranging from 117% to 125% over the past nine quarters, it’s clear that existing customers are finding more opportunities to use e-signature capability more often in more functions across the business.
These strong net dollar retention numbers don’t even take into account DocuSign’s extensive suite of Agreement Cloud products that cover all phases of the agreement process: prepare, sign, act, and manage. The company barely tapped into the additional $25 billion of market opportunity for other phases of the agreement process outside of the e-signature business.
This stock won’t stay low forever as the market will eventually realize that DocuSign customers will never return to pen and paper signatures. It is not too late to take some shares of this specialist software that has become an essential part of daily activities.
10 stocks we like better than MercadoLibre
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Brian Wither owns DocuSign and MercadoLibre. Danny Vena owns Amazon, DocuSign, MercadoLibre, PayPal Holdings and Roku and has the following options: long January 2024 $95 calls on PayPal Holdings. will heal owns MercadoLibre and PayPal Holdings. The Motley Fool owns and recommends Amazon, DocuSign, MercadoLibre, PayPal Holdings and Roku. The Motley Fool recommends eBay and recommends the following options: Short Calls April 2022 at $62.50 on eBay. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
