Market Plunge: 2 Stock-Split Stocks Begging to Buy

This year, rising inflation and rising interest rates have affected the stock market. really, S&P 500 It had its worst first half since 1970, falling more than 20% between January and June. But that hasn’t stopped the spread of the stock-split frenzy.

With little else to be excited about, some investors have enthusiastically embraced the recent wave. stock splits, and there is some rationale for this. Forward stock splits are usually only required after significant share price appreciation, which means they indicate that a company is doing something right.

With that in mind, both of these companies recently completed stock splits, and both stocks look like smart long-term investments.

1. Amazon

Rising costs have put pressure on heroine (AMZN 4.00%, this year. The company posted generally accepted accounting principles (GAAP) losses in each of the last two quarters, failing to post quarterly profit for the first time since 2015. That’s leaving some investors feeling worried, but inflation is a temporary headwind, and Amazon is well positioned to accelerate profitability down the road.

Of course, most consumers associate Amazon with e-commerce — its marketplace driven 41% of online retail sales in the US last year, and its expansive logistics infrastructure helps create a great experience for buyers and sellers, who network Supercharges effects that increase its power. Business. But Amazon is also the undisputed leader cloud computingAnd that should make the company more profitable over time.

In the first quarter, Amazon Web Services (AWS) captured a 33% market share in cloud services, more than the next two vendors, and the company isn’t likely to lose its lead anytime soon. research firm gartner recently recognized AWS as an industry leader, citing its unmatched potential for innovation and its broad portfolio as key advantages.

This is especially noteworthy because cloud computing is much more profitable than retail. Over the past few years, AWS has consistently posted an operating margin of about 30%, but operating margins on the rest of Amazon’s business rarely exceed 5%. Better yet, the cloud computing market is expected to grow by about 16% per year to $1.6 trillion by 2030, according to Grand View Research.

That trend should keep AWS in growth mode for years, and as it becomes a large percentage of Amazon’s top line, the company should become increasingly profitable. But Amazon is also gaining market share in digital advertising, another high-margin industry that should turbocharged profitability in the long run.

On that note, the shares currently trade at 2.9 times sales, a discount of 3.8 times its five-year average sales. that’s why it stock split stock A smart buy right now.

2. Shopify

Shopify (shop 11.10%, grew at an explosive pace during the pandemic, but the company is now grappling with similar headwinds as Amazon. Consumers have responded to persistent inflation by cutting back on discretionary online purchases rather than prioritizing essentials such as food and fuel. As a result, Shopify saw sales growth slow to 16% in the second quarter, up from 57% in the prior year, and it posted a GAAP loss of $0.95 per diluted share, down from a profit of $0.69 per diluted share.

Those disappointing results have left some investors experiencing a downturn, but Shopify is well positioned to weather the storm and emerge stronger on the other side. Its platform allows merchants to manage orders and sales across physical and digital storefronts. This includes online marketplaces such as Amazon and social media such as TikTok, but also includes direct-to-consumer (DTC) websites.

This gives Shopify an edge over marketplace operators. DTC business models are gaining momentum as they give brands more control over the buyer experience, increasing the potential for lasting customer relationships. Shopify complements its software with a number of adjoining services, including payment processing, discounted shipping, and financing. Those tools democratize commerce for merchants, and they’ve fueled strong demand. In fact, Shopify is the market leader in e-commerce software, and its platform driven 10.3% of online retail sales in the US last year, second only to Amazon.

Looking to the future, Shopify has embarked on a growth strategy that should significantly strengthen its position in the commerce market. One aspect of that strategy is the Shopify Fulfillment Network (SFN), a system of warehouses augmented with predictive software and mobile robots that will eventually allow sellers to offer two-day delivery to buyers across the US.

Shopify is also working to grow upmarket for larger businesses with its software platform, Shopify Plus. Plus now features business-to-business (B2B) commerce tools, which means merchants can sell B2B and D2C from the same online store. This potentially opens the door to a massive revenue stream. According to Grand View Research, B2B e-commerce sales are expected to grow by almost 20% per year to reach $33 trillion by 2030.

Additionally, business-to-consumer e-commerce sales this year will total $5.5 trillion, exposing Shopify to a tremendous market opportunity. And with shares trading at 9.1 times sales — near five-year lows — it Growth stock is a screaming buy,

John McKay, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Trevor Genevin There are positions in Amazon and Shopify. The Motley Fool has positions at Amazon and Shopify and recommends it. The Motley Fool recommends Gartner and recommends the following options: long January 2023 $1,140 call on Shopify and January 2023 short $1,160 call on Shopify. The Motley Fool has one Disclosure Policy,

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