Over the past century, the US stock market has recovered from every bear market. Even after the Great Depression of the 1930s, when the Dow Jones Industrial Average fell more than 75% from its previous highs, managed to recover.
There is a good chance that this will continue and that the current bear market will end. Therefore, long-term investors should look for discounted stocks to hold before the moose return. Here’s why it might be wise to get some shares Free Market (MELI -4.22%) i Semrush Holdings (SEMR -2.50%) before the next bull market arrives.
1. Free Market
Shares of the leading Latin American e-commerce company are down 53% from their all-time highs. This happened while MercadoLibre continued to expand its top line, so its valuation has fallen to an incredibly low multiple. The stock trades at just 5.3 times sales. There has only been one other time since the IPO in 2007 that the stock has traded at a lower multiple, which was in 2009. So these prices are certainly attractive.
Global e-commerce players like it Shopify i etsy have struggled, but MercadoLibre saw revenue jump 56.5% year-over-year to $2.6 billion in the second quarter. In addition, e-commerce continued to grow in Latin America. MercadoLibre saw gross merchandise volume rise 26% year over year in the second quarter to $8.5 billion, and sold 275 million products during the same period.
MercadoLibre is not only one of the leaders in Latin American e-commerce, but also dominates the emerging fintech industry. The company’s digital wallet and financial services platform, Mercado Pago, now has more than 38 million active users generating $30.2 billion in total payment volume.
MercdoLibre has only scratched the surface of all its potential in the region. The company has 84 million active users across all its platforms, but there are more than 650 million citizens in Latin America. This leaves substantial scope for capturing market share and increasing the digitization of finance and commerce in the region. With more than $1 billion in trailing 12-month free cash flow and its current leadership status, MercadoLibre can invest to make the most of this opportunity.
The stars seem to be aligned for MercadoLibre. The stock is at its cheapest multiple in years, but the company continues to grab market share in a lucrative industry and is seeing incredible growth. You may want to take advantage of this extraordinary situation to capitalize on the next bull market.
2. Semrush
It’s certainly not as big as MercadoLibre, but Semrush is still a leader in the marketing technology space. Semrush offers tools to help businesses optimize their marketing campaigns, including short-term strategies like social media marketing and long-term efforts like search engine optimization.
Semrush is the dominant player with 91,000 paying customers at the end of Q2. Some of their clients are also big names: HubSpot, Sales forcei Metaplatforms“Every Facebook uses Semrush.
One of the main concerns investors had with Semrush was that it wasn’t a necessary service. As business budgets shrink due to inflation and a possible recession, companies may cut software that is not crucial to their operations.
Many investors thought that Semrush would be one such platform. However, the second quarter showed that this company is considered a necessity after the demand for its services was barely suppressed. Revenue rose 39% year over year to $63 million in the period, and its net retention rate remained healthy at 125%.
This was probably due to Semrush’s wide-ranging product suite. The company has over 50 tools for marketing teams, making it a global platform that businesses must have on hand. In comparison, their rivals only specialize in a few categories, making them more expendable in a tough economy.
Semrush is not profitable and barely generates cash. The company lost $15 million and generated just $8 million in free cash flow in the trailing 12 months. However, this is for the best. The company has spent heavily this year to relocate its employees who were living in Russia. More than 60% of its workforce lived in Russia before the invasion of Ukraine, and this relocation effort has been successful. As of the second quarter, almost all of its full-time employees had left Russia.
This expense reduced profitability, but it is a long-term investment in your people. With the business continuing to execute and the stock 65% off its all-time highs, you can buy this high-quality business at a bargain price today.
Randi Zuckerberg, former director of market development and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jamie Louko has positions in Etsy, MercadoLibre, Semrush Holdings, Inc. and Shopify. The Motley Fool has positions in and recommends Etsy, HubSpot, MercadoLibre, Meta Platforms, Inc., Salesforce, Inc. and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 Shopify calls and short January 2023 $1,160 Shopify calls. The Motley Fool has a disclosure policy.
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