Growth stocks are a great tool for building wealth. While maintaining a long-term focus on a company's prospects is important, it's ideal to identify stocks that are undervalued or benefiting from a near-term catalyst that could lift their share prices in the near term.
To give you some ideas, let's look at two competitively positioned businesses that could be timely buys now.
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1. Alibaba
Alibaba (BABA +6.96%) is benefiting from two massive tailwinds: e-commerce and cloud computing. These are huge opportunities, with global e-commerce alone valued around $6 trillion and growing, according to eMarketer. Alibaba shares have underperformed the past few years, but they are currently up 41% year to date supported by improving financial results.
Alibaba's e-commerce marketplaces, where it generates profitable revenue from merchant fees and services, are starting to turn the corner after a sluggish stretch the past few years. The company's total revenue grew 7% year over year in the March-ending quarter, with double-digit growth in customer management revenue from the Taobao and Tmall commerce businesses.
The real reason the stock could be undervalued and due for a monster rally over the next year is the accelerating growth in the cloud business. Artificial intelligence (AI)-related cloud services are surging, driving triple-digit growth rates in revenue for the seventh straight quarter. Overall, Alibaba's cloud revenue grew 18% year over year last quarter, up from 13% and 7% in the previous two quarters.
NYSE: BABA
Key Data Points
Alibaba is seeing strong adoption of its open-source Qwen3 AI model, which has been downloaded over 300 million times. Its AI cloud growth could accelerate further, considering that demand is stretching from large enterprises down to small businesses. This indicates broad market strength for Alibaba's AI technology that may not be reflected in the stock's modest earnings multiple.
It's also worth noting that Alibaba's AI creates synergies with its e-commerce operation. It powers improved search and product recommendations that help boost sales for merchants, and therefore, grow revenue for the company's largest and most profitable business.
The stock's recent pullback makes it a very timely buy right now. The forward price-to-earnings multiple of 14 indicates significant upside potential in the near term and long term.
2. MercadoLibre
MercadoLibre (MELI +1.42%) is dominating the e-commerce and fintech market in Latin America -- most notably in Brazil, Argentina, and Mexico, its top three markets. Latin America has a large underbanked population that is driving robust growth for the company's services. Despite delivering incredible returns to investors over the last decade, the stock remains an excellent investment that can outperform the market in 2025 and beyond.
NASDAQ: MELI
Key Data Points
MercadoLibre has been a growth machine over the last 15 years. It is still posting high-double-digit revenue growth, and the stock continues to climb along with it, up 43% over the past year.
Its online marketplace has been gaining share across its top markets. The company has invested in offering better value to its 67 million unique active buyers. This has led to record brand performance scores, indicating a widening lead for the business.
It is also expanding into new services, making it difficult for a competitor to keep up. MercadoLibre's subscription service called MELI+ offers free shipping like Amazon Prime. Plus, its new credit card offering presents a new revenue channel for the company. Management has noted that cardholders tend to shop more frequently on the marketplace.
MercadoLibre is also using its scale to offer superior yields on customer deposits. This shows a low-cost advantage that it has achieved through its growth, which strengthens its competitive position and bolsters its long-term growth potential.
Traditional valuation metrics make the stock look expensive. But that's due to management sacrificing near-term margin to expand the business. However, its profit margin has been steadily increasing over the past five years, rising from 0% to 9%. The stock continues to trade at a lower price-to-sales multiple than it did prior to the pandemic, which could support more gains for investors in 2025 and beyond.
