2 Top Growth Stocks to Buy Hand Over Fist Before the Next Bull Market

Recession fears caused all three major U.S. financial indexes to fall into a bear market last year. The Dow Jones Industrial Average has nearly recouped its losses, but the S&P 500 and the Nasdaq Composite are still down 11% and 18%, respectively. That means investors still have time to capitalize on the downturn.

Here are two growth stocks to buy hand over fist before the next bull market.

1. PayPal dominates online payment processing

The first stock to buy is PayPal Holdings (PYPL 2.76%). The investment thesis for the fintech company is simple: PayPal runs one of the largest payments networks in the world, with 435 million active accounts, and it holds an industry-leading 42% market share in online payment processing, according to Statista. PayPal is also the most accepted digital wallet in North America and Europe, and it was the second-most-downloaded finance app worldwide last year. In other words, the company is perfectly positioned to benefit from the secular shift toward digital payments.

PayPal reported lackluster financial results last year as it contended with headwinds like high inflation and unfavorable foreign exchange rates. Revenue increased 8% to $27.5 billion and free cash flow climbed 4% to $5.1 billion. But given its strong competitive position in an expanding industry, PayPal should be able to reaccelerate revenue growth when consumer spending rebounds and economic headwinds diminish.

The company has hardly scratched the surface of its $110 trillion addressable market, but investors have good reason to believe that will change in the future. The number of digital wallet users will increase 53% between 2022 and 2026, according to Juniper Research. Meanwhile, digital wallets are expected to take share in e-commerce and physical point of sale transactions. Both trends should be tailwinds for PayPal.

Of course, PayPal is already the dominant player in online payment processing, but its recent partnership with Apple could help extend that success to physical retail. Starting this year, iPhone users can add PayPal- and Venmo-branded cards to their Apple Wallets and use them anywhere Apple Pay is accepted. That could be a game changer for PayPal, because Apple Pay is the most popular in-store mobile wallet among U.S. consumers.

With that in mind, shares currently trade at 3.4 times sales, a discount to the three-year average of 9 times sales. That creates an attractive buying opportunity.

2. MercadoLibre leads Latin American e-commerce

The second stock to buy is MercadoLibre (MELI 2.52%). The investment thesis for the Argentina-based company is straightforward: MercadoLibre runs the largest online commerce and payments ecosystem in Latina America, a region where rapid internet expansion is paving the way for adoption of e-commerce and digital payments. In fact, Latin America ranked as the second-fastest-growing e-commerce market in the world last year, and MercadoLibre is perfectly positioned to benefit from that trend.

The company benefits from immense scale. Its e-commerce marketplace receives nearly four times more visitors than the next-closest online shopping destination. That adds momentum to the network effects inherent to its business, as sellers tend to gravitate toward the platform with the most buyers, while buyers gravitate toward the platform with the most sellers.

Additionally, MercadoLibre has reinforced its leadership with adjacent services for advertising, logistics, payments, and financing. Those products make its marketplace even more compelling for merchants. MercadoLibre has seen strong adoption across all services, but its fintech subsidiary Mercado Pago has been particularly successful. In fact, Mercado Pago has evolved into the third-most-popular digital wallet in Latin America.

In a nutshell, MercadoLibre has a booming commerce business that is complemented by its flourishing fintech business, and that has consistently translated into strong financial results. In fact, despite battling economic headwinds, third-quarter revenue climbed 45% to roughly $2.7 billion, and net income jumped 33% to $2.56 per diluted share. Better yet, MercadoLibre could easily accelerate growth under more favorable economic conditions.

Looking ahead, e-commerce sales in Latin America should increase at 14% annually to reach $293 billion by 2027, and digital payments should increase at 14% annually to reach $510 by the same year, according to forecasts from Statista. But given MercadoLibre's strong position in both markets, shareholders should expect the company to grow much more quickly.

With that in mind, MercadoLibre stock currently trade at 5.8 times sales, a bargain compared to the three-year average of 12.6 times sales. That's why this stock is worth buying.