Tariffs and talk of a recession have been making major headlines this week, and the market is reacting with predictable volatility. The Nasdaq Composite (^IXIC -0.18%), which features a riskier, tech-loaded group of stocks, is in correction territory, 13% off its recent highs as of this writing.
While some investors may be running for the hills, or at least to safer stocks, savvy investors recognize that this could be an excellent buying opportunity. But it’s only worth buying top stocks that you can be confident will rebound and soar much higher. Amazon (AMZN 1.05%) and MercadoLibre (MELI 2.34%) fit the bill.
1. Amazon: Down 19%
Amazon has incredible potential in all its businesses, but the excitement today is in the generative artificial intelligence (AI) opportunity. Amazon’s AI business already has a multi-billion-dollar run rate, and McKinsey estimates a long-term opportunity of $4.4 trillion.
CEO Andy Jassy continually expounds on the opportunity ahead for Amazon. He sees a huge shift coming where companies move to the cloud, where the bulk of the generative AI development is happening. Amazon is already seeing an uptick in its cloud business, Amazon Web Services (AWS). Sales increased 19% year over year in the fourth quarter, and it went back to being Amazon’s fastest-growing business.
Jassy says that current company spend is still 90% on the premises, which creates a mind-boggling opportunity as it switches to the cloud. The generative AI piece is speeding that up. He also envisions generative AI becoming an essential component of application development, presenting the need for every company to be on the cloud and using generative AI services.
That’s not to mention Amazon’s e-commerce business, which is still its largest. It’s investing in efficiency actions to speed up delivery times and cut costs, and it’s adding tons of new brands and products to maintain its leading position and make sure it can account for as many of its customers’ purchases as it can. It recently launched a new program called Amazon Haul, where shoppers can find low-priced items in one place.
It’s also a formidable player in streaming, where it now owns MGM Studios and has its own original content, and where it can feature video-based ads — not to mention its robust advertising business.
Amazon has a long growth runway. Down 19% from its recent highs, it trades at a forward, 1-year price-to-earnings (P/E) ratio of 26, which is a great deal on a top stock.
2. MercadoLibre: Down 13%
MercadoLibre’s main business is also e-commerce, but it’s still in a hyper-growth stage. E-commerce in its Latin American region lags about 10 years behind the U.S., with only 13% penetration. That gives it a long runway, and it’s harnessing the opportunity with exploding growth rates.
Revenue increased 96% in the 2024 fourth quarter year over year (currency neutral), and gross merchandise volume was up 56%. These are typical numbers for MercadoLibre, and it doesn’t look like it’s going to slow down anytime soon.
It’s reinforcing its position as it benefits from strong network effects. This led to growth in unique buyers, which increased from 85 million to 100 million in 2024. As buyers discover the platform, they engage at higher rates, and buyers in three or more categories are climbing. So is average purchase frequency. Average quarterly items purchased per buyer increased from 7.1 to 7.8 in 2024.
It has phenomenal delivery speeds, with 72% of items delivered throughout its network within 48 hours at the end of 2023. That was actually a slowdown, because it now offers a weekly delivery day option for customers in Meli+, its membership program. That offers an incentive for customers and ultimately saves costs.
Like Amazon, it has entered new businesses, and it’s expanding its platform to include a large assortment of financial services like digital payments and asset management. It’s on its way to getting a bank charter in Mexico, where it’s planning to launch a digital bank, and its goal is to become the largest digital bank in the country.
In Q4, total payment volume increased 49% year over year, while assets under management increased 74% to $6.6 billion.
MercadoLibre stock is 13% off its recent highs, but that’s a short-term blip. At the current price, it trades at a forward, 1-year P/E ratio of 31, an excellent price for a high-growth, high-opportunity stock that you can hold forever.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has positions in MercadoLibre. The Motley Fool has positions in and recommends Amazon and MercadoLibre. The Motley Fool has a disclosure policy.
