President Donald Trump started his second term two months ago, but his trade policy has already shaken the stock market. His administration has either imposed or plans to impose tariffs on imported goods from several countries, including China, Canada, and Mexico.
Investors are worried about the potential consequences of a trade war. Recession fears have resurfaced and dragged the stock market sharply lower in recent weeks. The broad-based S&P 500 (^GSPC 0.49%) has declined 9% from its high, and the technology-focused Nasdaq Composite (^IXIC 1.22%) has tumbled 13%.
It is impossible to predict how far or how long the stock market will fall. But investors can take solace in this indisputable fact: The S&P 500 and Nasdaq Composite have eventually recovered from every decline, and there is no reason to think this one will end differently. In that sense, the current drawdown is an opportunity for patient investors.
Here’s why Tesla (TSLA 7.59%) and Shopify (SHOP 3.85%) are worth buying today and holding forever.
1. Tesla
Tesla recorded its first-ever decline in annual deliveries last year despite global electric car sales increasing 25%. Meanwhile, price cuts meant attract consumers hurt profits, leading to poor financial results. Revenue was essentially flat at $97 billion, and non-GAAP (generally accepted accounting principles) earnings declined 22% to $2.42 per diluted share.
Importantly, Tesla has a potential catalyst in the June launch of autonomous ride-sharing in Austin, Texas, followed by several other U.S. cities before year-end. Alphabet‘s Waymo was first to market by several years, but Tesla has more driving data, and its robotaxis cost much less because they rely solely on computer vision. Those advantages theoretically position Tesla as a formidable competitor.
Tesla has another potential catalyst in Optimus, an autonomous robot designed to disrupt the labor industry by handling dangerous or burdensome tasks in place of human workers. CEO Elon Musk says Optimus is “the most advanced humanoid robot by a long shot,” and he even speculated that Tesla may start selling models as soon as the second half of 2026.
Wall Street expects Tesla’s adjusted earnings to increase 24% annually through 2026. That makes the current valuation of 100 times adjusted earnings look expensive. However, the consensus estimate does not account for the possible acceleration in earnings growth that may result from Tesla’s robotaxi services and robotics products.
Admittedly, factoring those nascent businesses into the valuation makes Tesla a very risky stock. If the company fails to get those businesses off the ground in a timely manner, its market value could decline sharply. But the stock is down 50% from its high, and that drop has made the risk-reward profile more attractive.
Tesla has multitrillion-dollar market opportunities in robotaxis and robotics, so its market value could increase severalfold in the years ahead. Hedge fund billionaire Ron Baron says Tesla could be a $5 trillion company within 10 years. That prediction implies 575% upside from its current market value of $740 billion. I agree wholeheartedly.
2. Shopify
Shopify reported mixed results in the fourth quarter, missing estimates on the bottom line. Revenue increased 31% to $2.8 billion, the second consecutive sequential acceleration, and non-GAAP earnings increased 29% to $0.44 per diluted share. Also, Shopify reported a 10-basis point increase in take rate, meaning merchants are engaging more deeply with its adjacent services.
Wall Street expects Shopify’s adjusted earnings to grow 22% annually through 2026. That makes the current valuation of 75 times adjusted earnings look expensive. But Shopify beat the consensus earnings estimate by an average of 24% in the last six quarters, and may continue to top estimates as it pursues what management sees as a $849 billion market opportunity.
E-commerce still accounts for a relatively low percentage of retail sales around the world, and Shopify is well positioned to benefit as the market expands. Several analysts rank the company as a leader in digital commerce software, and its merchants account for 12% of online retail sales in the U.S. and 6% in Europe.
Furthermore, Forrester Research recently recognized Shopify as a leader in wholesale (also called business-to-business, or B2B) commerce, a market three times bigger and growing just as quickly as retail e-commerce (also called business-to-consumer, or B2C). Shopify reported 140% B2B gross merchandise volume growth in the fourth quarter.
In summary, Shopify not only has a strong presence in the retail e-commerce market, but also is successfully executing on a much larger opportunity in wholesale commerce. Add to that the fact the stock is currently trading about 30% below its high, and investors can confidently buy a small position in Shopify today.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Shopify and Tesla. The Motley Fool has positions in and recommends Alphabet, Shopify, and Tesla. The Motley Fool has a disclosure policy.
