Although there has been some positive market news lately, with banks reporting healthy growth, the market overall remains down. The S&P 500 has slipped just under 20% this year and the Nasdaq Composite has fallen even more as tech stocks report challenging growth conditions.

E-commerce remains pressured as well, with inflation taking a big bite out of consumer spending power. But for investors with a long-term mindset, this could spell opportunity. Two of the top e-commerce stocks are Shopify (SHOP 4.90%) and MercadoLibre (MELI 1.96%). Which one is the better buy today?

Shopify: powering small business e-commerce

Shopify operates a huge platform powering e-commerce for thousands of small businesses and even many large businesses seeking customized solutions. For small businesses, Shopify's prefab constructs offer so much more than they would be able to afford within their limited budgets. These solutions are so customizable anyway that small businesses don't need anything else.

For larger companies, which have a bigger budget, the solutions are still so compelling that they're attractive anyway for the value they provide and the cost savings that come along with them. Shopify is leaning into this larger business segment, demonstrating that it can successfully expand into new areas.

Growth was robust heading into the pandemic, and it completely exploded when lockdown orders came in and every small business needed a web presence to survive. Shopify, which offers a multitude of shopping and payment solutions, was the obvious choice for many of these businesses. The company quickly expanded to meet demand, but profitability is now pressured between slowing growth and unnecessary infrastructure.

Management is working to reduce that while plugging away on upgrading its features and attracting new business. Investors were pleased with the third-quarter results announced this week that demonstrated quick progress.

Revenue increased 22% over last year to $1.4 billion, and monthly recurring revenue increased 8% to $107 million. Merchant solutions revenue increased 26%, indicating that more businesses are using Shopify solutions off of the e-commerce platform, a strong sign of growth opportunities ahead.

Shopify stock jumped after the report, but it's still down 75% this year. With the company's growth position still intact, this may be a compelling buy opportunity.

MercadoLibre: Latin America's e-commerce giant

MercadoLibre has the largest e-commerce presence in Latin America, operating in 18 countries out of its Argentina headquarters. It has created a formidable business, with $8.8 billion in trailing-12-month revenue, and has successfully branched into digital payments and other fintech services.

Latin America e-commerce is still growing at a rapid rate, and MercadoLibre is benefiting from both its first-mover's edge as well as its powerful technology and delivery networks. After skyrocketing at the beginning of the pandemic, sales growth is now moderating. But it's still high, to the tune of 57% year over year in the second quarter of 2022.

MercadoLibre capitalized on incredible demand in 2020 to scale even bigger, and now that it has captured market share and expanded its business, it's turning to increasing profitability and fine-tuning many of its features. 

The fintech segment has been an important part of its overall growth and margin expansion. Its digital payments app, Mercado Pago, has been especially lucrative; the company added 2.4 million new digital wallet users to the platform in the second quarter. Fintech growth is still triple-digit, increasing 113% year over year in the first quarter of 2022 and 107% in the second quarter.

Despite its continued achievements, MercadoLibre stock is down 38% this year. That's due to a mix of what was previously an unreasonably high valuation and general negative sentiment toward tech stocks.

Which is the better buy?

Based on current performance and future growth opportunities, I'm leaning toward MercadoLibre as the better buy here. But let's take a look at how valuation factors in.

MELI PS Ratio Chart

MELI PS Ratio data by YCharts

Despite its drastic plunge, Shopify's price-to-sales ratio is almost double MercadoLibre's. That clarifies the choice from a valuation perspective and clinches it for me that MercadoLibre looks like the better buy right now.