These 3 Stocks Are the Best Bear Market Buys

The bear market in tech stocks has changed perceptions on many levels, especially concerning valuations. Stockholders who routinely tolerated P/E ratios above 100 last year have sold off their more expensive stocks.

Nonetheless, this does not mean growth has necessarily slowed down for every company. In fact, some consumer-oriented companies still grow at a rapid pace. Thanks to falling stock prices, investors can now buy some of the pricier fast-growth stocks at a substantial discount. Those holding out for lower valuations should give more serious consideration to Airbnb (ABNB 0.75%),  MercadoLibre (MELI 3.09%), and Shopify (SHOP 1.11%).

Airbnb

Airbnb is not the only vacation rental platform, nor is it an industry pioneer. However, it expanded the scope of such rentals by renting shared spaces and even boutique hotel rooms. The first mover, Vrbo, owned by Booking Holdings, does not allow for short rentals on shared spaces.

Moreover, Airbnb can utilize AI and machine learning to personalize listings better. Customers can choose from around 4 million properties around the world. This means they can turn to it for a weekend getaway or a dream vacation overseas. And because Airbnb is only responsible for leasing, it can add listings without the burden of construction costs.

With this approach, the company reported $3.6 billion in revenue in the first half of 2022, up 62% over the same period in 2021. Meanwhile, interest expenses fell from $428 million to just $13 million. So Airbnb earned $360 million in the first six months of the year, compared with a $1.2 billion loss in the first half of 2021.

At current prices, Airbnb has lost more than half its value since its early-2021 peak. Still, its price-to-sales (P/S) ratio has fallen to nine, close to record lows and far below the peak P/S ratio of 36 in early 2021. While that may still seem pricey, the valuation, rapid revenue growth, and relative ease in adding spaces could make it the right time to buy Airbnb.

MercadoLibre

MercadoLibre has built a competitive advantage by becoming the Amazon, PayPal, and Shopify of Latin America. Founded in 1999, it developed first-mover status among Latin American e-commerce companies.

As a cash-based region, e-commerce was out of reach for many residents of Latin America. The company pioneered an area of fintech, offering solutions through Mercado Pago that it later made available outside the company. In some of its countries, it has launched Mercado Envios to provide packaging and shipping solutions to many of its clients.

Such segments have further entrenched MercadoLibre in Latin America, allowing it to hold up against competitive threats from Amazon and the Sea Limited e-commerce arm, Shopee.

This ecosystem generated more than $4.8 billion in revenue in the first six months of 2022, a 57% increase compared with the same time frame in 2021. It also earned $188 million in net income over that time, up from $34 million during the same period in the prior year. Lower cost of revenue growth and higher amounts of non-core income offset the rapid increase in operating expenses.

Despite rising profits, MercadoLibre trades at a nearly 60% discount from its all-time high. Additionally, the P/S ratio of five is well off the 25 sales multiple from late 2020. With revenue growth remaining robust, now might be the time to consider the e-commerce company, given its lower valuation.

Shopify

Shopify is far from the only e-commerce platform provider. However, it has become the No. 1 platform in the U.S., according to Oberlo, through its comprehensive offerings. Shopify offers numerous tools to help clients customize their sales sites. Its research has also revealed that slower transactions meant fewer sales, so it has emphasized speed to stand out.

Additionally, unlike most peers, it has ventured beyond software to expand its ecosystem. Offerings such as Shopify Payments and funding through Shopify Capital have taken it into fintech. It has also taken on an industrial orientation by entering the fulfillment business. This arguably means that it has transcended most of the competition, and now competes most closely with Amazon.

Its $2.5 billion in revenue for the first two quarters of 2022 is up 19% versus the same period last year. Also, it turned back to a net loss, losing $2.7 billion versus a $2.1 billion profit during the same time frame in 2021. Still, investments in its business make that loss more forgivable.

Amid that loss and the bear market, Shopify has fallen 84% from its 52-week high. Still, its P/S ratio has fallen to seven, a deep discount from early 2021 when some investors paid more than 60 times sales for Shopify. As it provides more support for e-commerce, Shopify should eventually recover its high and enjoy a bright future.