For much of the past few years, stocks in the e-commerce and fintech spaces seemed only to go up. With the pandemic forcing most shopping online, these companies saw massive user growth and the stock appreciation that goes with it.
Fast forward to today, and it's a different story entirely. Some of the darlings of 2020 have been sold off and have investors wondering whether they can return to their pandemic-level growth numbers. The truth is that most of those companies won't see the kind of exponential growth they experienced then. However, those who sold may have been shortsighted. Here are three companies I think are no-brainer stocks to buy right now.
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1. Shopify
When Shopify (SHOP 0.14%) reported its fourth-quarter and FY 2021 earnings recently, the results clearly showed that the company has become the go-to platform for merchants looking to create an online presence. Full-year revenue was $4.6 billion, good for a 57% increase over 2020. Gross merchandise volume (GMV), the total value of merchandise sold on the platform, increased 47% to $175 billion. These metrics show that even at a market cap of $68 billion, the company can grow its top line at an impressive rate while its customers utilize Shopify to grow their own businesses.
Shopify also has global ambitions. In 2021, the company partnered with Global-e Online (GLBE 0.78%) to help merchants simplify their cross-border payments, and a diverse slate of international brands launched on Shopify. As of the end of 2021, 55% of its merchants were from North America, so Shopify still has vast opportunities internationally.
One might think that a company growing revenue 57% year over year might be prohibitively expensive, and while Shopify isn't cheap, it's also not as pricey as it was recently. At the time of this writing, shares are down 68% from their 2021 high, and Shopify's price-to-sales (P/S) ratio is 14, near where it was in 2019. To put that into perspective, Shopify has grown its revenue by almost 200% over that same time frame.
2. Amazon
Similar to Shopify, Amazon's (AMZN -1.14%) stock chart went up and to the right for much of 2020. While most of the stock market has crashed hard recently, Amazon is down less than 10% over the trailing 12 months, making it a winner compared to many other tech stocks.
Amazon's 2021 stock performance belies its business performance. Full-year revenue increased 22% to $470 billion, operating income grew slightly to $25 billion, and net income reached $33 billion, compared to $21 billion in 2020. Not too shabby for one of the largest companies in the world.
Hidden within the headline numbers is the ever-increasing prominence of Amazon's AWS cloud service. Amazon held onto its position as the market leader for cloud hosting, and AWS revenue grew 37% in 2021. By comparison, AWS revenue grew 30% in 2020. AWS is also becoming an increasingly large portion of Amazon's overall revenue. In 2021, AWS accounted for 23% of overall revenue, compared to 12% in 2020. It's clear that AWS will be a growth driver for years to come.
Amazon also recently announced a 20-for-1 stock split and a $10 billion stock buyback plan. While the stock split has no impact on the company's value, the share buyback program is accretive to shareholder value as it increases the value of every share held when there are fewer shares on the market.
3. Paypal
Digital payments provider PayPal (PYPL -1.83%) has had a rough go of it recently, with shares down 68% from their recent high. However, there are short-term reasons for what the market views as slowing business metrics clouding what is still a strong business.
Using internal data, PayPal management has determined that at this stage in PayPal's business life, overall users are less important than finding ways to monetize its existing users more effectively. Essentially, about one-third of the user base drives the vast majority of PayPal's volume. Considering the increasing investment necessary to keep minimally engaged users connected, the management team sees more benefit in driving engagement than in chasing new users.
Despite this change in focus, user growth remains important to PayPal. To that end, 2021 ended with 426 million active accounts, 49 million added during the fiscal year. This is a slowdown compared to 2020, but to be fair, that's a tough comparison, since the user growth was pulled forward during the height of the pandemic. The year also saw total payment volume grow 33% and revenue grow 18%. Turning to cash generation, 2021 ended with $6 billion in operating cash flow and $5 billion in free cash flow.
None of these results indicate a business that's in decline, but the recent sell-off has put valuation more in line with slowing growth. PayPal's P/S ratio is currently 4.5, which means shares are the cheapest they've been in over four years. PayPal is still a big player in the fintech space, and picking up shares at this valuation is an absolute no-brainer.
