It was a difficult year for the NASDAQ Composite Index (NASDAQ INDEX: ^IXIC), plunging nearly 30% this year. While some of this selling was certainly warranted (as 2021 valuations could not be sustained), some stocks oversold.
Here are three stocks I’m considering buying because their long-term opportunities are still intact while their stock prices are well below their highs: Alphabet (GOOG 0.26%), MercadoLibre (MELI 2.05%)and CrowdStrike (CRWD 2.63%). Stick around to find out why.
Alphabet (formerly known as Google) is a huge business conglomerate, but its primary focus is advertising. In good times, this company shines. Unfortunately, in tough times, advertising can be a tough business.
When companies are forced to cut costs to maintain profits, advertising budgets are often the first thing to do. That’s an easy cut compared to laying off workers or canceling projects, so many companies are doing it preemptively if they see signs of an economic downturn. This line of thinking hurt Alphabet in the second quarter, but it still managed to grow revenue 13% year-over-year.
This resilience shows how vital it is for companies to advertise on Alphabet’s family of companies (like the Google search engine, the Android operating system or YouTube).
Despite rising spending (which has dented Alphabet’s profitability), Alphabet is trading at an all-time low of 18.6 times earnings. That’s very cheap for a company whose revenues have always recovered from economic downturns.
I am confident that this downturn will be like any other and that Alphabet’s revenue growth will return to higher levels, taking with it its strong cash flow.
Another internet powerhouse, MercadoLibre, is based in Latin America. Serving 18 countries – home to approximately 650 million people – MercadoLibre brings many facets of e-commerce that Americans take for granted to Latin America.
With fintech and commerce platforms, consumers can shop on Mercado Libre (the commerce site) and pay with Mercado Pago (its payment platform) using whatever credit card they have. obtained through Mercado Credito (its credit division). Then, the package can arrive at the customer’s doorstep in less than 48 hours after being delivered by Mercado Envios (its logistics division). Nearly 80% of the packages processed were delivered in less than 48 hours in Q2.
MercadoLibre is the e-commerce site in Latin America, and for good reason. Its results, which were fantastic in the second quarter, confirm its domination of the market.
Revenue grew 57% year-over-year to $2.6 billion, driven by the strength of fintech, which increased revenue 107% to $1.2 billion. The trade faces tougher comparisons (thanks to a COVID-affected Q2 2021) but still grew revenue 23% year-over-year while its gross merchandise volume grew 26 %. Although not massively profitable, MercadoLibre still posted a profit margin of 4.7% in the second quarter.
With these results, you can expect the stock to be up significantly this year or at least break even. However, the shares are down 34% and the valuation sits at five times sales. The last time MercadoLibre was this cheap was during the height of the Great Recession in 2009.
MercadoLibre has traded around 12 times its sales for most of the last decade, so this stock is incredibly cheap. As a result, I think MercadoLibre is one of the strongest buys in the market today.
While the first two stocks are priced cheaply, CrowdStrike is not. Instead, it trades for 21 times sales. Still, I think it’s a great buy today because of its market opportunity and strong, sustained execution.
CrowdStrike is a cybersecurity company, and with the cost of cyberattacks expected to rise 15% per year through 2025, it’s an area that companies can’t afford to cut corners on right now. Thanks to its cloud-based platform, CrowdStrike’s software can deploy quickly to network endpoints (like phones or laptops). Its software uses artificial intelligence and machine learning to continually evolve the program. Thus, when a customer suffers an attack, the defense of the whole customer is reinforced thanks to this information.
While many companies have slowed their spending on enterprise software, CrowdStrike managed to grow its customer base by 51% in the second quarter (ended July 31) to 19,686. These customers include 69 from the Fortune 100 and 537 from the Global 2000, which shows that CrowdStrike still has many customers to win, especially small businesses around the world.
Annual recurring revenue (ARR) also grew rapidly in the second quarter, growing 59% year-over-year to $2.14 billion. Still, this is a drop in the ocean compared to the $126 billion market opportunity predicted by CrowdStrike in 2025.
While CrowdStrike can be an expensive stock, its huge market opportunity and strong growth are the culprits behind this valuation. Unfortunately, the best companies are often not cheap, so investors sometimes pay a premium to own a specific company. However, if CrowdStrike’s growth continues on its strong trajectory (ARR management projects will be $5 billion by January 2026), the price investors are paying today will seem much cheaper.
The NASDAQ now offers many attractive investment opportunities; investors just need the confidence to step in and buy stocks when all looks bleak.
Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Keithen Drury has positions in Alphabet (C shares), CrowdStrike Holdings, Inc. and MercadoLibre. The Motley Fool holds positions and recommends Alphabet (A shares), Alphabet (C shares), CrowdStrike Holdings, Inc. and MercadoLibre. The Motley Fool has a disclosure policy.