The recent wave of stock splits has some investors fired up. Of course, splitting a stock has no effect on corporate size or profitability. It's analogous to cutting a cake into more slices. You end up with the same amount of cake, but each piece is smaller. Similarly, splitting a stock leaves its market cap unchanged, but it makes individual shares more accessible, especially for investors who can't buy fractional shares through their brokerage account.
With that in mind, MercadoLibre (MELI 0.79%) and Shopify (SHOP 2.28%) could be the next companies to split their stocks. Shopify trades near $650 per share, and MercadoLibre trades near $1,150 per share -- that's a good chunk of change. But even if those splits don't happen, both stocks could still make you richer in the long run.
In 1999, MercadoLibre revolutionized the Latin American commerce industry with the launch of its online marketplace. A few years later, the company debuted its fintech solution, Mercado Pago, democratizing digital payments in a region where relatively few consumers have access to bank accounts and debit cards. MercadoLibre has since built a sizable logistics network to simplify shipping and fulfillment, and it has added advertising and financing tools to its portfolio.
That extensive ecosystem has differentiated MercadoLibre from its rivals, helping it become the leading e-commerce and fintech company in Latin America. Better yet, that dominant market position has given MercadoLibre significant pricing power. Its take rate -- commerce revenue as a percentage of gross merchandise volume -- hit 16.3% in 2021, up from 9.6% in 2019. In turn, revenue skyrocketed 78% to $7.1 billion last year, and the company posted a profit of $1.67 per diluted share, up from a loss of $0.08 per diluted share in the previous year.
Currently, just 62% of people in Latin America use the internet, and only 38% shop online. Those figures should trend upwards in the coming years, supercharging the e-commerce and digital payments industries. As the leader in both spaces, MercadoLibre should benefit greatly from that tailwind. And with shares trading at eight times sales -- well below their three-year average of 15 times sales -- now looks like a great time to buy this potential stock-split stock.
Shopify is the world's most popular e-commerce software. Its platform helps merchants list and sell products across dozens of channels, including custom websites and mobile storefronts, online marketplaces, social media, and brick-and-mortar locations. Shopify further simplifies commerce with value-added services like payment processing (Shopify Payments) and financing (Shopify Capital), and an app store that offers thousands of additional integrations.
That value proposition has helped Shopify win nearly 2.1 million customers, creating a significant network effect. By harnessing data generated across its platform, Shopify can provide its merchants with valuable insights that drive consumer engagement. Better yet, Shopify empowers merchants to grow their brand and build relationships directly with customers. That differentiates it from online retailers like Amazon and Walmart, which pull merchants onto one marketplace (rather than allowing them to operate a branded storefront).
That competitive edge helped Shopify capture 10.3% market share in U.S. e-commerce last year, making it the second-largest player in the space (behind Amazon). In turn, revenue rose 57% to $4.6 billion and the company posted a profit of $22.89 per diluted share, up nearly ninefold from $2.55 per diluted share in 2020. But e-commerce is still a growing industry, and Shopify is well-positioned to continue taking market share.
The company currently puts its market opportunity at $160 billion. Management has laid out a solid growth plan centered around geographic expansion, the building of a nationwide fulfillment network, and the Shop mobile app, a tool that allows consumers to discover relevant products and engage directly with sellers. And with shares trading at 18 times sales -- well below their three-year average of 40 times sales -- you can buy this growth stock at a bargain.