Nasdaq Bear Market: 2 Stock-Split Growth Stocks to Buy on the Dip | The Motley Fool (2024)

Several companies have announced stock splits this year. While investors were initially enthusiastic, that sentiment has faded as macroeconomic headwinds have pummeled the market. The growth-heavy Nasdaq Composite is now down 28% from its high, and many popular stocks have fallen even further.

For example, the stock prices of Shopify (SHOP 1.10%) and Amazon (AMZN -0.83%) have fallen 78% and 41%, respectively. Both companies plan to split their common stock in June, making the share price more accessible for investors. More importantly, Shopify and Amazon are key players in the multi-trillion-dollar e-commerce industry, and both stocks are trading at bargain prices.

Here's what you should know.

1. Shopify

Shopify simplifies commerce. Its software helps businesses manage sales, orders, and inventory across brick-and-mortar stores and various digital channels. That includes online marketplaces like Amazon and Walmart, as well as branded websites, mobile apps, and social media. Through its platform, sellers can also access critical services like payment processing, marketing tools, and small business loans.

In short, Shopify is an end-to-end solution for omnichannel commerce, and its software empowers businesses to grow their own brand across multiple sales channels. That value proposition differentiates it from Amazon, and it has made Shopify the most popular e-commerce software vendor, both in terms of market presence and user satisfaction, according to a G2 Grid Report. For context, Shopify powered 10.3%of online retail sales in the U.S. last year, which puts it in second place behind Amazon.

In the first quarter, rising costs caused revenue growth to decelerate, and various growth initiatives put pressure on margins. Even so, Shopify continued to gain market share in the U.S., both online and offline, and its financial performance over the last two years is still impressive.

Source: YCharts. TTM = trailing-12-months. CAGR = compound annual growth rate.

Looking ahead, management puts its market opportunity at $160 billion, and the company is executing on a potentially game-changing growth strategy.

Shopify recently announced a $2.1 billion deal to acquire Deliverr. That move will accelerate its ambitions to democratize fulfillment for merchants. Deliverr already provides fulfillment and logistics services to sellers on Amazon, Walmart, and many other popular platforms. And its network of warehouses and last-mile partners will make it possible for Shopify-powered businesses to offer two-day or next-day delivery to consumers across the U.S.

As a final thought, CEO Tobias Lütke recently purchased $10 million in Shopify stock, and other executives have made similar moves. That strongly suggests Lütke and his team believe the business will be worth more in the future. And with shares trading at 9.5 times sales -- their cheapest valuation in five years -- now looks like a great time to buy this beaten-down growth stock.

2. Amazon

Amazon operates the most visited e-commerce marketplace in the world. In 2021, its platform powered 41%of online retail sales in the U.S. To reinforce that edge, the company has continued to grow its logistics infrastructure in recent years, enhancing its ability to control shipping costs and delivery times. In fact, Amazon actually has excess capacity in its fulfillment and transportation network, according to CFOBrian Olsavsky.

To capitalize on that, the company recently announced Buy with Prime, a service that extends the benefits of its Prime membership program to third-party websites. That means select sellers will be able to use Amazon fulfillment even for products not sold on Amazon's marketplace.

Amazon's latest earnings report underwhelmed Wall Street. The company posted its first quarterly loss since 2015. But investors that cashed out overlooked a few important details. Its cloud computing business -- Amazon Web Services (AWS) -- captured a 33% market share in the first quarter, outpacing second-place Microsoft Azure by 12 percentage points. Financially, AWS's revenue growth accelerated to 37%, and its operating margin expanded 450 basis points to 35.3%. That makes AWS far more profitable than Amazon's retail business.

To that end, Amazon's bottom line has grown more quickly than its top line over the last two years.

Source: YCharts. TTM = trailing-12-months. CAGR = compound annual growth rate.

Amazon also gained ground indigital advertisinglast year. It accounted for 11.6% of U.S. digital ad spend, up from 10.3% in 2020. And that figure is expected to hit 14.6% by 2023, according to eMarketer. Better yet, digital advertising typically offers much higher margins than retail. That means Amazon's profitability should continue to accelerate as cloud computing and digital ad sales grow.

Here's the big picture: Amazon has a strong presence in three important industries, leaving plenty of room for future growth. And with shares trading at 2.3 times sales -- their cheapest valuation in the last five years -- chances are you'll regret not buying this growth stock on the dip.