Yesterday, the US markets fell drastically. The Nasdaq, which includes the most growth stocks, fell 5%, while the S&P 500 and the Dow Jones both fell over 3%. This came after the Federal Reserve raised interest rates by another 50 basis points on Wednesday, marking the largest increase made in a single meeting since May 2000. However, there were fears among traders yesterday that there may be a 75 basis-point hike in June. This is despite the Fed Chair, Jerome Powell, explicitly ruling this out.

Fear in the markets was also caused by a series of disappointing results, including from e-commerce companies eBay and Shopify. But yesterday’s sell-off does seem slightly overdone, especially as the Nasdaq has now fallen over 20% year-to-date, and over 5% in the past year. The one stock I think is particularly tempting at these levels is the Latin American e-commerce company MercadoLibre (NASDAQ: MELI).

Trading update 

After the market closed, it released a very promising trading update. Firstly, the headline figures were exceptionally strong. For instance, despite the slowdown that many e-commerce companies have been suffering in recent months, MercadoLibre managed to record Q1 revenues of $2.2bn, which was a record for the firm. This was also up around 67% year-on-year, which signals incredible growth. And in comparison to a net loss last year, it delivered net income of $65m. These are all great signs for any growth stock.

I was also very impressed that the firm managed to record gross profits of around $1.1bn, which was another record. This means gross profit margins were 47.7%, which considering the current rate of inflation, is extremely strong. These margins were aided by the fact that MercadoLibre had been able to pass on the higher costs through boosting its prices. It was also revealed that shipping costs as a percentage of total revenues continued to decline, demonstrating strong operational efficiency from the company. This bodes well for future profitability. 

Fintech strength 

Alongside the e-commerce business, I am very impressed with the fintech side of the business, known as MercadoPago. As banking penetration in Latin America remains low, this is an area where I feel growth can be particularly strong. Yesterday’s trading also highlighted the fintech sector as an area for growth. Indeed, in Q1, MercadoLibre ended with a credit portfolio of $2.4bn. This is far higher than the $1.7bn at the end of 2021. There are also plans to expand the company’s buy-now, pay-later service, called MercadoCredito.

There are risks, however. For example, the current macroeconomic environment is very challenging, especially as higher interest rates may increase the cost of servicing its large debt pile. Further, there are worries that consumer spending may decrease, as inflation continues to bite. 

What am I doing with this growth stock?

Although I’m wary about buying e-commerce companies now, due to their slowing growth after the pandemic, I feel that MercadoLibre is unique. Its revenue growth has remained excellent, and profit margins have also held up well. For me, this distinguishes the e-commerce firm from other growth stocks. Therefore, I’m tempted to add more of the shares to my portfolio after the Q1 trading update. 

The post After the US stock market plummeted, here’s a no-brainer growth stock to buy appeared first on The Twelfth Magpie.

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Stuart Blair owns shares in MercadoLibre. The Motley Fool UK has recommended MercadoLibre and Shopify. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Latin American e-commerce giant

MercadoLibre (NASDAQ: MELI) released its Q4 results on Tuesday evening, and it offered further evidence of its incredible growth prospects. For example, the company reported net revenues of $2.1bn in the quarter, which was up 73.9% on a currency-neutral basis, and 60.5% in US dollars. This meant that full-year revenues grew to $7bn, over a 75% increase from last year. The company also has a diversified source of revenues, due to both e-commerce and the fintech segment. Fintech performed especially well in the fourth quarter, with revenues rising to $773m, a 70% increase from last year. As banking penetration in Latin America is still quite low, there is certainly room for more growth. These are all very positive signs in growth stocks.

Despite this, I was slightly disappointed to see a net loss of $46.1m, after being profitable over the past few quarters. This loss was mainly attributable to foreign currency losses — a downside of operating in international markets — and major interest expenses due to the company’s large debt pile. But I’m not overly worried as these seem like short-term problems.

As such, I’ll continue to add MercadoLibre shares to my portfolio, especially as the stock remains below $1,000. This means that it currently trades at a price-to-sales ratio of 7, which is historically low for MercadoLibre and below other growth stocks. For a company with such incredible growth, this seems like a bargain.

Another beaten-down growth stock

SoFi Technologies (NASDAQ: SOFI) is another growth stock that piques my interest. In fact, after reaching highs of around $24 last November, it has since fallen back to just $10. This sell-off now seems overdone for these reasons.

Firstly, the fintech has recently acquired a bank charter, meaning that it will be able to directly lend to customers. This should be a major boost for profitability. Secondly, the bank is growing at incredible rates. Indeed, in the Q3 trading update, it announced that it had 3m members, which was a 96% year-on-year rise.

There are certainly risks with the company, however. For example, despite seeing slower revenue growth than MercadoLibre, it trades at a P/S ratio of 8. This may signal that there is further to fall. Further, I was slightly concerned at its recent acquisition of Technisys in an all-share deal worth $1.1bn. Although it is expected that this will create around $80m in cost savings between 2023 and 2025, I was disappointed to see the share dilution and would have preferred the company to use some debt in the deal. I also feel that the deal may have been slightly expensive.

Even so, I have faith in CEO Anthony Noto and think that SoFi can be a real competitor in the fintech space. Therefore, I may add more SoFi shares to my portfolio at its current price.

The post 2 beaten-down growth stocks to buy right now appeared first on The Twelfth Magpie.

More reading

• 3 stocks I’m looking to buy in July
• 2 excellent growth ideas for a Stocks and Shares ISA in June 2026

Stuart Blair owns shares in MercadoLibre and SoFi Technologies. The Motley Fool UK has recommended MercadoLibre. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.