Since the wave of investor hype surrounding e-commerce has passed, many businesses with solid financials have been tossed to the wayside. While it may be disappointing for shareholders to watch their holdings tumble, it's an excellent opportunity to grab more shares now that valuations decreased -- but only if the long-term thesis is still intact.

Two commerce businesses that I think are fantastic buys during the current bear market are Amazon (AMZN -0.17%) and MercadoLibre (MELI -0.81%). Despite strong execution, their stocks are down 38% (Amazon) and 59% (MercadoLibre) from their all-time highs. Therefore, I think investors would be wise to increase their positions in their stocks right now.

Retail giants with side hustles

MercadoLibre and Amazon started off delivering e-commerce solutions to their targeted customer base. For Amazon, this began with the U.S., but then expanded worldwide. On the other hand, MercadoLibre is focused on Latin America, which consists of a population double that of the U.S.

Both companies are still growing their base segment sales, despite the significant boost that occurred in 2020 and 2021.

Company Metric Q2 YOY Growth
Amazon North America Net Sales 10%
MercadoLibre Commerce Net Revenue 23%

Source: Amazon and MercadoLibre. YOY: Year-Over-Year.

However, neither company stopped with the initial market, and both created other verticals that aren't directly related to their commerce businesses.

MercadoLibre launched a fintech wing to support digital payments for its commerce division, which rose quickly to nearly overtake commerce as the largest segment. And Amazon Web Services (AWS) is the cloud computing infrastructure market leader and remains Amazon's only profitable business segment, making it invaluable to the company.

Both segments outperformed their parent companies' initial growth segment during Q2.

Company Segment Q2 YOY Growth
Amazon AWS 33%
MercadoLibre Fintech 107%

Source: Amazon and MercadoLibre.

This growth speaks to two important qualities of these businesses. First, it shows management knows how to create and execute new ideas. Second, these companies are less dependent on a single segment, as executives can lean on another business vertical if one isn't performing at its best.

With the empires these two companies have built, you'd think their stocks would get more respect, but that's not the case.

Cheap valuations for great businesses

It is no secret that stock valuations were inflated over the past two years, and 2022 has served as a year to correct them. But the pendulum has swung too far in the case of Amazon and MercadoLibre, as their stock valuations are much lower than in years past.

At 2.5 times sales, Amazon has returned to 2016 levels, which doesn't reflect how strong the AWS segment is. AWS's margin profile is much stronger than a typical retailer's (29% operating margin in Q2). As it grows to become a more significant portion of Amazon's business, its valuation should tick up due to increased profits.

MercadoLibre trades at 4.8 times sales, the lowest besides the depths of the Great Recession in 2009. Even then, it only stayed at that level for a couple of months. But it's hard to make a case against a company that is growing revenue 57% YOY and valued at a similar level to one of the grimmest periods in recent investing history.

At their current valuations, Amazon and MercaoLibre are nearly impossible to ignore. Additionally, with the growth verticals of AWS and MercadoLibre's fintech, they are far from done growing. Even though e-commerce growth is taking a break from previous highs, the long-term tailwind still blows in favor of online shopping, so I'd expect these segments to ramp up their growth in the coming years.

These two powerhouse companies make great buys in this bear market; investors should pick them up while they are still cheap.