Growth stocks have faced a difficult period in recent months, partly due to rising bond yields (which may be more expensive to borrow) and rising inflation. But many of these companies are still experiencing incredible growth, and offer a nice time to buy their latest dips. These are two that I am particularly interested in.
Latin American e-commerce giant
Free market (NASDAQ: MELI) The past few years have seen incredible growth, with 2020 revenues reaching 9 3.97bn. The beginning of 2021 has been better. Indeed, in its second-quarter trading update, it recorded revenue of 1.7bn. This is an increase of 102.6% per year. Unique active subscribers also grew by 50% year on year to 75.9 million. This shows that the company is growing, and there are no signs that this growth is slowing down.
Moreover, the company has reached profitability. Indeed, in the second quarter, it reported net income of 68 68.2 million. While this puts the stock in a price-to-earnings ratio close to 280, it is also important to note that the company is currently prioritizing growth over higher profits. This gives me hope that it will be able to increase profits over the next few years, and while still expensive, I think MercadoLibre stock has found a place to grow. This is especially true of the fast-growing e-commerce market in Latin America.
The current decline in MercadoLibre share prices (it fell 19% last month) also makes the e-commerce giant a more lucrative purchase. This deepening has been mainly due to the increase in bond yields, with some shareholders taking profits. Rising bond yields are a very legitimate concern, especially since the company pays ণ 2.4bn, and paying greater interest could be the end result. But the company is still performing great, and I think there is significant potential for the opposite. Therefore, I can add more shares to my portfolio soon.
An EV growth stock
I am cautious due to the high valuation of EV Growth stocks. But after a 33% drop in the year, I feel it NIO (NYSE: NIO) The stock now offers a fair price. This is an increase of about 70% in stock compared to last year.
The reason NIO is preferred over other EV stocks is its current growth. In fact, in its second-quarter trading update, it reported revenue of 1.3bn, an increase of 127% year-on-year. As such, it has a higher growth rate than MercadoLibre at the moment, which is a very good sign. In September, the company was able to supply more than 10,000 vehicles, an increase of 125% year-on-year. This shows that the shortage of semiconductors has not affected the company very much and it is still managing to meet the high demand.
One of my problems with NIO is its current non-profitability, and lack of a clear path to profitability. Indeed, in the second quarter, it reported a net loss of about 90 90 million. Increasing competition in the EV market could hamper this and hamper the company’s path to profitability. Still, the potential is very clear, and while I prefer MercadoLibre as a growth stock, I’m certainly looking at NIO as well. If it goes down further, it could be a buy for me.
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Stuart Blair owns shares in MercadoLibre. Motley Fool UK is owned and recommended by MercadoLibre and NIO Inc. And pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.