IBuying stocks during a volatile market can be excruciating. Especially now that stocks are falling, it can be difficult to see stocks fall immediately after you buy them.
However, long-term investors should take advantage of these sell-offs. Since there’s no point in timing the market, buying stocks regularly is a great way to stay invested and take advantage of the discounts we’re seeing. I did, and I recently added three of my favorite companies: Shopify (NYSE:SHOP), NVIDIA (NASDAQ:NVDA)and semrush (NYSE: SEMR).
Shares of the leading Ecommerce Platforms have been flattened of late, falling almost 77% from their all-time highs. With that in mind, many investors might think the company is faltering, but Shopify is still doing well. In the first quarter of 2022, Shopify saw revenue increase 22% year over year to $1.2 billion as it helped sell over $43 billion in gross merchandise volume from e-commerce merchants.
Shopify has tools to help merchants build, run, and grow their ecommerce operations. It offers everything from fulfillment services to marketing tools, making Shopify an all-inclusive platform.
While this is a great deal, the stock has fallen on near-term fears of a recession. A recession could force a drop in discretionary spending on things like e-commerce items. Considering the company gets paid in part by processing payments, fewer purchases means fewer sales for Shopify.
This stock’s valuation has fallen to nine times sales, its lowest valuation since 2016. While there may be some dark clouds for Shopify in the short-term, this historically low valuation looks appealing, especially considering it’s a top dog with over 100,000 shares 10 retailers will trade % of US e-commerce sales in 2021. The company may be in for some pain in the near term, but Long-term investors should take advantage of these low prices and hold Shopify for the long term.
Nvidia was also crushed despite continued execution. In the company’s first fiscal quarter ended May 1, 2022, the chipmaker reported Q1 revenue of $3.6 billion in its gaming chip segment, a quarterly revenue record. The data center business posted a record quarterly revenue of $3.75 billion in the first quarter, up 83% year over year.
These two segments are the be-all and end-all of Nvidia. 71% of the top 500 supercomputers use Nvidia chips, and according to Jon Peddie Research, Nvidia’s discrete graphics cards had an 83% market share in gaming as of Q3 2021. Despite that dominance and quarterly success, Nvidia shares are down 44%. year to date.
Just because Nvidia is the leader doesn’t mean its growth will stagnate for years to come. The company provides chips for companies in exciting segments such as artificial intelligence and the omniverse. Overall, Nvidia sees a $1 trillion opportunity ahead.
Importantly, Nvidia has the earnings and cash flow to invest heavily in unlocking this potential. In the first quarter alone, the company generated over $1.6 billion in net income and nearly $1.4 billion in free cash flow. If the company can remain a leader in the future and gain shares in this industry, Stocks could be worth it at its current valuation of 14x turnover.
Semrush is overlooked by most investors, which could be an error. The company offers an all-in-one solution for marketing and helps companies to reach their target audience effectively. No competitor has the same sweeping dominance as Semrush, making it the best platform out there. The company generated $205 million in trailing-12-month revenue, which means it still has plenty of room to capitalize on an opportunity that’s currently valued at $16 billion.
One of the risks with Semrush was his ties to Russia. The company is based in Boston, but 800 employees work in Russia. If there had been sanctions between countries prohibiting communication with the US-based team, it could have affected the company’s operations and made this a risk. The company is now reducing this risk by relocating its employees from Russia to Europe.
That will hurt profitability in 2022, pushing the net loss down to $45 million, a noticeable change from the $3.3 million loss in 2021. While it hurts in the short term, it significantly reduces the company’s risk and makes the stock more attractive to the company in the long run.
Shares are down 60% from their all-time highs, bringing the company’s valuation down to an attractive multiple of 8.3 times sales. With a valuation as low as this, given its dominance in a major industry and significant de-risking event, investors may want to add Semrush to their portfolios.
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Jamie Louko has positions in Nvidia, SEMrush Holdings, Inc. and Shopify. The Motley Fool has positions in and recommends Nvidia and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has one confidentiality policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.