April was a tough month for growth investors; the bear market continued, challenging even the most optimistic investors. Many stocks are setting new lows for the year -- but where many see disaster, one can also see opportunity.
Many of the best-performing e-commerce stocks over the past five years have been sold into the ground over the past year. You'll see in a minute that a number of these companies are dealing with some short-term headaches, but there's no need to overthink it.
These three stocks rule e-commerce, have bright futures ahead, and are worth considering buying on their current weakness.
1. Amazon
U.S. e-commerce giant Amazon (AMZN 1.49%) recently reported first-quarter earnings for 2022 and saw revenue growth slow to 7% year over year. Revenue grew 44% year over year in Q1 of 2021, so such a dramatic slowdown hasn't helped investors warm up to Amazon's stock in recent months. It's now down roughly 38% from its high, the stock's most significant drawdown in over a decade.
Image source: Getty Images.
Are Amazon's best days behind it? While it has grown into a massive $1.3 trillion market cap company, I think that Amazon still has long-term upside. Amazon Web Services -- its cloud computing platform and the company's most profitable segment -- is still growing, turning in 37% year-over-year growth in this year's first quarter.
Meanwhile, Amazon is the market-share leader in U.S. e-commerce, which has only penetrated roughly 13% of overall retail spending. It recently announced "Buy with Prime," which lets merchants integrate Amazon Prime into their own online store -- a move that could help expand Amazon's already massive footprint in retail. Investors can use this market volatility to pick up shares of one of e-commerce's most dominant businesses.
2. Shopify
Software company Shopify (SHOP 1.26%) is a true innovator in the e-commerce space. Its platform enables anyone to open and operate an online store, giving merchants of all sizes the ability to compete online. More than a million merchants use Shopify and collectively provide the company with the second-largest share of the e-commerce market in the United States behind Amazon.
The stock has fallen more than 70% from its high, the largest drawdown in Shopify's history as a public company. The company grew revenue 22% year over year in this year's first quarter, lower than investors may have been looking for. And as noted, Amazon is launching a service to compete head-to-head with Shopify, called "Buy with Prime."
Slowing growth and competition are fair concerns that investors may have about Shopify. However, I would argue that the stock's dramatic decline compensates investors for the additional risk. Over the years, management has led Shopify from an underdog to a prominent e-commerce company.
So investors could be glad they bought lower-priced shares if Shopify can work through these short-term challenges.
3. MercadoLibre
E-commerce is thriving in emerging markets, and MercadoLibre (MELI 0.87%) is king in Latin America. The company does e-commerce, logistics, and fintech, so it touches every aspect of a purchase, from ordering to fulfillment to payment. The company recently reported first-quarter 2022 results and posted strong growth; revenue increased 67% year over year.
Unfortunately, fear in the market has prevented investors from appreciating the company's strong fundamentals. The stock has fallen about 60% from its high, its most significant drop since the financial crisis in 2008-2009.
MercadoLibre has a lot of positive developments in its business, which could make the current dip a great buying opportunity for long-term investors. Latin America is among the world's fastest-growing regions for e-commerce, and MercadoLibre's fintech business is flourishing. In this year's first quarter, the fintech business grew users by 31% year over year to 35.8 million while revenue grew 112%.
Latin America has a population of roughly 664 million people, so there is a lot of room for growth in the years ahead.
