With 2021 wrapping up, some investors evaluate their performance over the year. I prefer looking forward and searching for investment opportunities. Two stocks I own and will add to during December are PayPal Holdings (NASDAQ:PYPL) and MercadoLibre (NASDAQ:MELI)

The stock prices of both are down nearly 40% from all-time highs, yet their businesses are strong. Why are two high-profile names struggling lately to provide returns for investors? 

man making digital payment

Image source: Getty Images.

1. PayPal

PayPal provides a payment platform to process consumer and business transactions. It also owns Venmo, a popular app for sending money; and Honey, the browser add-on that saves customers money through automated coupon searches. The tailwinds behind e-commerce and digital payments blew hard throughout the pandemic, and PayPal benefited significantly.

One area that bears have focused on is eBay's (NASDAQ:EBAY) transition away from PayPal. Although eBay used to own PayPal and was the sole payment processor, the agreement no longer exists. But eBay's payment volume was only 3% of PayPal's total third-quarter volume.  

As for payment volume, it was up 26% to $310 billion in the third quarter, which brings PayPal's trailing-12-month volume to $1.2 trillion. Removing eBay transactions from the calculation accelerates its growth to 31%. Revenue grew 13% counting eBay-derived revenue and 25% without it. While losing a consistent revenue stream isn't a positive for PayPal, it is still executing well without it.

Replacing PayPal's eBay partnership, Amazon (NASDAQ:AMZN) recently began accepting Venmo as a payment form on its website. This is significant, as PayPal's flagship product isn't accepted as a payment form during Amazon's checkout process. After the Venmo partnership was reached, PayPal can realize new revenue streams from Amazon, the world's largest e-commerce retailer. 

PayPal was rumored to be buying Pinterest (NYSE:PINS), sending share prices tumbling 10% in late October. PayPal's stock price has not recovered even after it released an official statement noting it was not pursuing the acquisition. Its Venmo partnership with Amazon coincided with its third-quarter earnings release, but it wasn't enough to keep the market from selling off another 10%. With the stock now down more than $100 a share from its all-time high, the market seems to have forgotten PayPal's potential.

PayPal's valuation is also low, trading at a level not seen since March 2020.

PYPL PE Ratio Chart

PYPL P/E ratio data by YCharts.

With fourth-quarter guidance of 12% to 14% revenue growth and payment volume rising another 33%, PayPal is still a solid growth stock. Nothing in the financials suggests this stock should be down nearly 40%.

2. MercadoLibre

MercadoLibre is bringing aspects of e-commerce that U.S. consumers love to Latin America. It has PayPal's payment element, Amazon's e-commerce platform, and shipping solutions to 18 countries across North and South America. It also has a small but growing credit platform for lending to businesses and consumers.

The pandemic gave MercadoLibre a huge boost. Revenue grew year over year at more than 100% during the previous four quarters. Its third-quarter revenue overlapped these incredible results, and growth is slowing, but revenue still increased 73% in the quarter.

None of MercadoLibre's business segments are lagging; all are executing. While nowhere near PayPal's payment volume, Mercado Pago processed $20.9 billion, growing 59% on a currency-neutral basis. The logistics division, Mercado Envios, shipped 32% more packages year over year. Currency-neutral gross merchandise volume sold on its e-commerce platform rose 30% to $7.3 billion. Mercado Pago added an option to buy, sell, and hold cryptocurrencies in Brazil beginning at the end of November.

Its price-to-sales ratio is as cheap now as it was during the low point of the pandemic-driven sell-off.

MELI PS Ratio Chart

MELI P/S ratio data by YCharts.

Investors should be taking advantage of MercadoLibre's depressed prices. It's not often the market holds a sale like it has now. Latin America's digital transformation is not complete, and MercadoLibre will continue being the transition's driving force.

PayPal and MercadoLibre are two growth stocks down significantly. While market price fluctuations may result in 20% swings periodically, 40% drops must be examined for business weakness or market inconsistency. I believe market inconsistency is the case for both companies, which is why their stocks are my December top buys.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.