It can be agonizing to buy stocks during a volatile period in the market. Especially now that stocks are tumbling, it can be challenging to see stocks drop immediately after buying them.
However, investors focused on the long term should take advantage of these sell-offs. Because there is no sense in timing the market, regularly buying stocks is a great way to remain invested and take advantage of the discounts we see right now. That's what I have been doing, and I recently added to three of my favorite companies: Shopify (SHOP 0.23%), Nvidia (NVDA -10.01%), and Semrush (SEMR -1.46%).
1. Shopify
Shares of the leading e-commerce platform have been clobbered recently, falling almost 77% from their all-time highs. Considering this, many investors might think the company is floundering, but Shopify is still performing well. In the first quarter of 2022, Shopify posted a 22% year-over-year revenue expansion to $1.2 billion as it helped over $43 billion in gross merchandise volume get sold by e-commerce merchants.
Shopify has tools that help merchants build, run, and grow their e-commerce operations. It offers everything from fulfillment services to marketing tools, making Shopify an all-encompassing platform.
While this is a great business, the stock has dropped because of short-term fears, namely the concern about a recession. A recession could force a pull-back in discretionary spending on things like e-commerce items. Considering the company gets paid partially by processing payments, fewer purchases means less revenue for Shopify.
This stock's valuation has dropped to nine times sales, its lowest valuation since 2016. While there could be some dark clouds in the short term for Shopify, this historically low valuation looks appealing, especially considering it is a top dog with its merchants representing over 10% of U.S. e-commerce sales in 2021. The company might be in for some short-term pain, but long-term investors should take advantage of these low prices and hold Shopify for the long haul.
2. Nvidia
Nvidia has also been crushed, despite continued execution. In the company's first fiscal quarter, which ended May 1, 2022, the chipmaker reported Q1 revenue in its gaming chip segment of $3.6 billion, a quarterly revenue record. Its data center business also saw record-high quarterly revenue of $3.75 billion in Q1, which soared 83% year over year.
These two segments are Nvidia's bread and butter. 71% of the top 500 supercomputers use Nvidia chips, and according to Jon Peddie Research, Nvidia's discrete graphics cards had an 83% market share in the gaming space in Q3 2021. Despite this dominance and quarterly success, shares of Nvidia are down 44% year to date.
Just because Nvidia is the leader doesn't mean its growth will fall flat over the coming years. The company provides chips for companies in exciting segments like artificial intelligence and the omniverse. As a whole, Nvidia sees a $1 trillion opportunity ahead of it.
Importantly, Nvidia has the profits and cash flow to invest heavily in capturing this potential. In Q1 alone, the company generated over $1.6 billion in net income and almost $1.4 billion in free cash flow. If the company can remain a leader and gain share in this industry going forward, shares could be worth buying at its current valuation of 14 times sales.
3. Semrush
Semrush is overlooked by most investors, which might be a mistake. The company provides an all-in-one solution for marketing, helping businesses effectively reach their target audience. No rival has the same wide-reaching dominance that Semrush does, making it the best platform on the market to use. The company generated $205 million in revenue over the trailing 12 months, meaning it still has plenty of room to capitalize on an opportunity currently worth $16 billion.
One of the risks with Semrush has been its connections with Russia. The company is based in Boston, but 800 employees work in Russia. If there were sanctions between the countries prohibiting communication with the U.S.-based team, that could have hurt the company's operations, making this a risk. The company is now reducing this risk by relocating its employees out of Russia and into Europe.
This will take a toll on 2022 profitability, pushing its net loss down to $45 million, a noticeable change from the $3.3 million loss in 2021. While this hurts in the short term, it significantly reduces the company's risk and makes the stock more attractive for the long haul.
Shares have dropped 60% from their all-time highs, which brings the company's valuation down to an appealing multiple of 8.3 times sales. At a low valuation like this, given its dominance in a large industry and its significant de-risking event, investors might want to add Semrush to their portfolio.
