A brutal bear market may have put some investors off stocks. The emotional pain of seeing one's assets lose considerable value was undoubtedly too much for some investors to bear.
However, the silver lining in that decline is that many stocks sell for a significant discount, making it easier to turn $100,000 into $500,000 by retirement. Knowing this, investors may want to consider taking advantage of discounted prices in stocks such as MercadoLibre (MELI -1.98%), Zscaler (ZS 0.01%), Snowflake (SNOW -0.26%), and Shopify (SHOP 0.14%).
1. MercadoLibre
MercadoLibre will likely drive returns because it is the definition of resiliency. The Latin American conglomerate thrives specifically because of the challenges in its region. It began as an ecosystem to help merchants conduct online commerce, but it may have become better known for solving other problems for online sellers and customers.
It serves its cash-based customers through Mercado Pago by facilitating electronic commerce and giving consumers a safe place to store cash, particularly in some inflationary markets. Moreover, for merchants unable to package and ship goods quickly, it created Mercado Envios to perform those services.
And thanks in large part to its fintech arm, revenue for the first nine months of 2022 was $7.5 billion, 53% higher than the same year-ago period. This led to a profit of $317 million.
MercadoLibre has also begun a stock recovery, and with its price-to-sales (P/S) ratio of about 6, investors can buy at a relative discount.
2. Zscaler
Zscaler provides cybersecurity for a mobile and connected world. It accomplishes this by taking a "zero trust" approach, which assumes every potential user is a security threat until proven otherwise. It employs artificial intelligence (AI) to evaluate users based on factors such as one's role or location to discern authorized users. Additionally, Zscaler's software operates on the edge, placing it closer to its users to hasten response times.
Demand for this software remains high even amid a downturn. In its fiscal first quarter of 2023 (which ended Oct. 31, 2022), revenue rose 54% year over year to $356 million. That came after achieving 62% annual revenue growth in fiscal 2022. Also, in fiscal Q1, losses were $68 million, down from $91 million in the year-ago quarter.
Finally, like many cybersecurity stocks, Zscaler has begun to recover from a massive stock price decline. With the 15 P/S ratio just above multiyear lows, the shares may finally be ready to resume their move higher.
3. Snowflake
Snowflake is the leader in the data cloud. It allows entities to store, edit, and monetize data from a secured location in the cloud. This protects data integrity without compromising its usability.
And unlike competing data cloud products, it is usable across different cloud platforms, giving it an edge over its mega-tech peers -- a factor that may have helped it attract a pre-IPO investment from Warren Buffett's Berkshire Hathaway.
The strength of Snowflake's offerings is evidenced in its revenue growth. Its $1.5 billion in revenue in the first nine months of fiscal 2023 (which ended Oct. 31, 2022) increased 77% year over year. Losses during that time frame rose 8% to $590 billion, though the company spent heavily on operations to improve and better market its product.
Admittedly, the 26 P/S ratio makes it expensive. But the discount of more than 60% means that valuation has come down significantly, a factor that should increase returns for investors who buy at current levels.
4. Shopify
Shopify provides e-commerce platforms for merchants. While that business is intensely competitive, Shopify has separated itself from its peers in two critical ways.
The company stood out by making its site fast and highly customizable. This allows merchants to market themselves as they see fit and not lose customers due to slow processing times.
Second, it has built a more extensive ecosystem. Through its suite of products, merchants can get help with inventory management, payments, order fulfillment, and other critical services.
This led to $3.9 billion in revenue for the first three quarters of 2022, a 20% increase year over year. It posted losses over that time because investments to expand its fulfillment network took a financial toll. But since fulfillment helps Shopify transcend a possible identity as a "software stock," it likely played a part in the company attaining a No. 1 market share in the U.S. among e-commerce platforms, according to BuiltWith.
Admittedly, the stock lost over 80% of its value at one point. Still, Shopify has moved higher in 2023, and its massively discounted 12 P/S ratio probably makes it a once-in-a-generation buy at current levels.
