The past year has been rough for investors, especially those with growth-focused portfolios. The Nasdaq Composite has fallen deep into bear-market territory, currently 27% off its high, and many individual growth stocks have suffered even greater losses. For instance, shares of Shopify (SHOP -2.37%) and Adyen (ADYE.Y 0.53%) have plunged 82% and 55%, respectively.
That said, the Nasdaq has weathered worse downturns in the past, and it has always rebounded from every bear market. That means that sooner or later, another bull market will come along and drive the index to a new high. In the meantime, patient investors have an opportunity to buy high-quality stocks like Shopify and Adyen on sale.
Here's what you should know about these two stocks.
1. Shopify: Simplifying omnichannel commerce
Shopify's mission is to make commerce better. It provides software that helps merchants manage sales across physical and digital channels -- think online marketplaces, social media, and direct-to-consumer (D2C) websites -- and it provides supplemental services like payment processing, discounted shipping, and financing. That makes Shopify a one-stop shop for small-business owners, and that value proposition has generated strong demand.
In fact, Shopify is the most popular e-commerce software platform as measured by market presence and user satisfaction, according to a recent G2 Grid report, and it powered 10.3% of e-commerce sales in the U.S. last year, which puts it in second place behind Amazon.
Unfortunately, Shopify has struggled this year. Consumers have reduced discretionary spending in response to high inflation, and online shopping has also tailed off as the social impacts of the pandemic have faded. As a result, Shopify saw revenue rise just 16% in the second quarter, and it posted a GAAP loss of $0.95 per diluted share.
On the bright side, the company continued to gain market share in both online and offline commerce in the U.S. through the first half of the year, and the long-term investment thesis is still very much intact. Global retail e-commerce sales are expected to surpass $7 trillion by 2025, leaving a long runway for growth, and Shopify is executing on an aggressive growth strategy.
For instance, Shopify Plus -- a customizable commerce platform for larger enterprises -- has helped Shopify win companies like Netflix and Figs. In fact, Shopify Plus powers more than 14,000 brands, and management is working to grow that figure through product innovation. It recently introduced new artificial intelligence-powered marketing software for Plus merchants, and it added new business-to-business (B2B) commerce tools to the platform, meaning enterprises can sell B2B and D2C from the same website. That dramatically expands Shopify's addressable market, as B2B e-commerce sales are expected to top $33 trillion by 2030, according to Grand View Research.
In the short term, Shopify might continue to struggle with high inflation. But in the long term, its leadership in the e-commerce software space should fuel strong financial results, which means patient investors are well positioned to see market-beating returns when the next bull market rolls around. That's why this growth stock is worth buying.
2. Adyen: Simplifying digital payments
Adyen is a European company that simplifies digital payments. Specifically, its platform integrates payment processing (authorization), acquiring (settlement), and risk-management services, making it easy for merchants to accept all kinds of digital payments -- credit and debit cards, digital wallets, and buy now, pay later -- across online and offline storefronts. And by unifying transaction data from physical and digital sales channels, Adyen can also provide businesses with AI-powered insights that boost revenue and combat fraud.
On that note, Adyen has won numerous high-profile customers, including e-commerce marketplace Etsy, streaming platform Spotify, mobility service provider Uber, and fast food chain McDonald's. More importantly, the company has delivered strong financial results on a consistent basis, fueled by the secular shift toward digital payments.
In the first half of 2022, revenue climbed 55% year over year to 3.9 billion euros, driven by particularly strong growth in North America and the Asia-Pacific region, and net income rose 38% to 282 million euros.
Investors have good reason to be optimistic. Adyen is well positioned to benefit as online shopping continues to drive growth in digital payments, but the company is also gaining meaningful traction in physical stores. Point-of-sale (POS) volume skyrocketed 97% through the first half of 2022, and Adyen recently doubled down on that success with the launch of its own POS terminals.
Also noteworthy, Adyen operates its own banking infrastructure across the U.S. and Europe, meaning it can efficiently offer services like financing, card issuing, and deposit accounts to customers. That gives it a small edge over fintechs like PayPal Holdings and Stripe, and it creates a growth opportunity beyond digital payments.
For all of those reasons, this growth stock is worth buying today.
