Stock to Buy

Bull Market Coming: 2 growth stocks to buy now 

Bull market growth stocks to buy now

Before studying 2 growth stocks to buy now, let us dig a little deeper to understand how macro-economic environment has been behaving amidst worries about global slowdown. To surprise, inflation cooled drastically in previous year, and consumers continue to spend money more freely. US economic growth accelerated in 2Q mainly because of the modest uptick in consumer purchases, and it appears that this momentum has been more intensified in present quarter. Retail sales grew for the fourth consecutive month in July, and consumer sentiment increased to 2-year high in August, data from University of Michigan revealed. 

As per the Commerce Department, advance estimates of U.S. retail and food services sales for July 2023, after adjusting for seasonal variation and holiday and trading-day differences, but not for changes in price, came in at $696.4 billion, exhibiting a rise of 0.7% (±0.5%) in comparison to previous month, and up 3.2% (±0.7 percent) versus July 2022. Total sales for May 2023 through July 2023 period grew by 2.3% (±0.4%) as compared to the same period a year ago. This strong momentum is expected to bode well for the entire economy, even though this has especially positive implications for commerce companies. 

Keeping this in mind, let us discuss 2 growth stocks to buy now

1. Shopify Inc.

Shopify Inc. offers e-commerce platform mainly to small and mid-size businesses. The company has 2 segments: subscription solutions and merchant solutions. The company has announced financial results for the quarter ended June 30, 2023 (2Q23). On July 26, the company rolled-out its semi-annual product and innovation showcase, Shopify Editions and has integrated Shop Pay Installments into Shopify Point-of-Sale which enabled ability of retail merchants to provide in-store shoppers the same payment flexibility which is being offered online. 

Shopify Inc. ranks first in our list of 2 growth stocks to buy now

In 2Q23, the company’s subscription solutions revenue went up by 21% to $444 million against the prior year mainly because more merchants continue to join the platform and because of the pricing changes which went into effect for existing merchants in April. Monthly recurring revenue as of June 30, 2023 grew by 30% to $139 million in comparison to prior year. These gains were supported by the pricing changes and strong growth in the number of Standard and Plus merchants. Shopify Plus made the contribution of $41 million, or 29%, of MRR in comparison to 31% of MRR as of June 30, 2022. 

In 2Q23, gross profit of the company went up by 27% to $835 million in comparison to the previous year. Gross margin for 2Q came in at 49.3% against 50.7% in 2Q22, because of the higher mix of revenue from lower margin Merchant Solutions segment. Adjusted operating income of the company came in at $146 million, or 9% of revenue, in comparison to adjusted operating loss of $42 million or 3% of revenue in 2Q22. Difference primarily exhibits increased revenue against same period of the last year and lower adjusted operating expenses. Free Cash Flow of the company came at $97 million or 6% of revenues in comparison to negative FCF of $87 million or 7% of revenues in 2Q22. 

Cash and marketable securities of the company came at $4.8 billion as of June 30, 2023, and net cash position was of $3.9 billion post considering the outstanding convertible notes. Shopify Capital was having $719 million in loans receivables and merchant cash advances outstanding as on 30th June 2023. Y Intercept Hong Kong Ltd bought new stake in the company during the 1st quarter, as per the most recent filing with SEC. Institutional investor purchased 6,066 shares of the software maker’s stock valued at ~$291,000. 

Analysts at Robert W. Baird upped their price objective on the shares of the company from $55.00 to $65.00 in a report dated May 5th. Elsewhere, Royal Bank of Canada increased the price objective of the company’s shares from $75.00 to $80.00, giving the company an “outperform” rating on August 3,2023. 

2. Etsy, Inc.

The second stock in the list “2 growth stocks to buy now” is Etsy, Inc. The company operates top-10 e-commerce marketplace operator in United States and the U.K., having scalable operations in Germany, France, Australia, and Canada. It dominates interesting niche, connecting buyers and sellers with the help of online market to exchange vintage goods.

The Etsy marketplace’s active buyers touched all-time high in 2Q, exhibiting relevance of the brand and ability to establish opportunities for sellers. Growth in buyers supported the company’s core marketplace in returning to year-over-year GMS growth in May and June. The company saw GMS growth continue in the start of 3Q. 

In 2Q23, the company’s consolidated GMS was largely flat at $3.0 billion, exhibiting a fall of 0.6% year-over-year and down 0.4% on currency-neutral basis. Etsy marketplace GMS came in at $2.6 billion, down 0.7% year-over-year. The company acquired 6 million new buyers and it has reactivated 21% more buyers in comparison to the prior-year period. Etsy, Inc. retained active buyers at the levels above pre-pandemic rates on TTM basis. On the quarterly basis, active buyer retention trends improved both from year-over-year and prior quarter.

Consolidated revenue of the company came at $628.9 million, exhibiting 7.5% growth against 2Q22, with take rate (consolidated revenue divided by consolidated GMS) coming at 20.9%. The company closed 2Q with $1.2 billion in cash and cash equivalents and short- and long-term investments. Under repurchase program, during 2Q23, it repurchased aggregate of ~$39 million, or 411,421 shares, of common stock. 

For 3Q23, the company expects GMS in the range of $2.95 billion – $3.10 billion and revenues of between $610 million – $645 million. Etsy, Inc. projects adjusted EBITDA margin of 27%-28%. 

In the research report dated 3rd August, analysts at Truist Financial upped their price target on the shares of the company from $120.00 to $126.00. They gave a “Buy” rating on the company’s stock. Coming to the ratings, 2 investment analysts have rated “Sell”, nine analysts gave a “Hold” rating on the stock and 13 analysts gave a “Buy” rating.

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