2022 was a frustrating year for investors as the S&P 500 has had its biggest decline since 2008 when the global financial crisis wracked markets.
This time around, rising interest rates and inflation torpedoed stocks, pressuring both valuations and business performance, especially in areas like retail, tech, and transportation.
However, savvy investors know that bear markets are also great opportunities to buy stocks. Most stocks have seen their prices fall, but many of them offer the same value proposition they did just a year ago, and they're likely to rebound in a healthier economy, which could come as early as 2023.
To take advantage of the 2022 sell-off, here are three stocks I'm planning to buy in 2023.
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1. Airbnb
Unlike most of the tech sector, Airbnb (ABNB -1.03%) has posted strong results through 2022, benefiting from the recovery in the travel sector. In the third quarter, revenue rose 29%, and net income jumped 46%, however, the stock flopped in 2022, losing roughly 50% of its value.
That decline seems to owe more to broader market sentiment than Airbnb's actual performance, but investors seem to be expecting the company to get hit by recessionary headwinds in 2023. The stock sold off after its third-quarter earnings report as the short-term lodging services leader forecast slowing growth in its fourth quarter, and the analyst consensus calls for just 12% growth in revenue.
However, there's a good chance that the travel market will continue to recover and Airbnb will gain market share even if a recession happens. Throughput data from the Transportation Security Administration shows air travel continues to be strong, though still down slightly from 2019 levels.
Additionally, Mastercard SpendingPulse data showed a 15% jump in restaurant spending during the holiday season, a sign that spending on services like travel and restaurants is still rebounding and outperforming spending on retail goods.
A year ago, much of the world was still coping with the omicron variant, which weighed on the travel market, so Airbnb should also benefit from easy comparisons with that period.
Overall, the company looks well positioned to continue growing as short-term rental services take market share, and the stock looks surprisingly cheap at an enterprise-value-to-free-cash-flow ratio of just 15.
2. Shopify
After several years of crushing the market, Shopify (SHOP -2.06%) shares crumbled in 2022 with the stock falling around 75%.
E-commerce stocks fell sharply as online retail sales slowed after a boom during the height of the pandemic, but that shouldn't dissuade investors from believing in the e-commerce software leader's long-term potential.
Shopify is still posting solid growth, with gross merchandise volume (GMV) up 21% in constant currency over Black Friday weekend to $7.5 billion. There are also other signs that e-commerce sales are stronger than the market seems to think. According to Mastercard SpendingPulse, online sales outgrew brick-and-mortar sales by 10.6% to 6.8% during the holiday season.
After a disruption in 2022, retail sales should continue to shift online from the brick-and-mortar channel, and Shopify will benefit. The company is investing in new services like logistics and fulfillment, following its acquisition of Deliv, and it seems to have fended off a threat from Amazon's Buy with Prime program.
While Shopify stock might still seem expensive at a price-to-sales ratio of 8, the company has the ability to ramp up profitability thanks to its subscription software model. After 2022's sell-off, investors seem to be underestimating the growth potential here.
3. MercadoLibre
Another e-commerce stock that has had a significant pullback in 2022 is MercadoLibre (MELI -0.92%), with the stock giving up around 35%.
Unlike its U.S.-based counterparts, MercadoLibre, which provides an online marketplace, digital payments, and other services in Latin America, continued to post strong growth even as pandemic tailwinds faded.
MercadoLibre's Brazilian division, which makes up about half of the company's total sales, easily outgrew the market over Black Friday, posting a 19% increase in gross merchandise volume compared to a 23% decline in the overall Brazilian e-commerce market. Mercado Pago, its digital payments service, also delivered strong results with a 38% increase in GMV in physical and online retail.
In the third quarter, MercadoLibre also reported strong results with revenue up 61% to $2.7 billion, and the company's profitability also surging, showing the scalability of the business. Operating margin improved from 6% to 11% and gross margin increased 6.7% thanks in part to increased investments and growth in its ads business.
With growth in new businesses like ads, continued strength in payments, and the emergence of the middle class in Latin America, MercadoLibre continues to have a bright future ahead of it.
