If you've been paying attention to the stock market at all over the past couple of years, you've learned that growth stocks can be unpredictable.
Remember what happened to innovative businesses that make online shopping possible? Their stock prices soared to unimaginable heights during the lockdown phase of the pandemic, only to collapse once it became safe to leave the house again.
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If the topsy-turvy nature of growth stocks makes you cautious, I've got some great news: You don't need to commit an entire week's salary every time you want to place a bet on a risky growth stock.
Growth stocks are unpredictable, but a dollar-cost averaging approach ensures you don't put too many of your chips on one just before it tanks. Now that competing online brokerages have done away with commissions, everyday investors can slowly build up positions too.
Assuming you already have all your bills paid, just $200 is more than enough to buy shares of both these top growth stocks. Read on to see why they have a good chance to outperform.
1. Global-e Online
E-commerce has come a long way since Amazon began selling books out of a garage in 1994. One aspect that hasn't improved much, though, is selling across borders.
The good folks at Global-e Online (NASDAQ: GLBE) spend their time learning a dizzying array of different languages, rules, and regulations so merchants don't have to. The international e-commerce platform also integrates with DHL, Salesforce, and PayPal to help merchants manage fulfillment services, customer relationships, and payment processing.
Clearly, international merchants are excited about reaching a larger audience with help from Global-e Online. In the fourth quarter of 2022, total revenue soared 69% year over year. At just $139.9 million, there's a lot more room to grow, too.
Cautious investors will notice that this stock is trading at a high multiple of 11.5 times trailing sales, even though the underlying business is still losing money. This combination makes its price extremely sensitive to any signs of a slowdown. Slowly building a position with relatively small purchases of this stock looks like the right move.
2. Shopify
Direct-to-consumer merchants who want to retain their customer relationships are beating a path to Shopify's (NYSE: SHOP) door. Revenue during the fourth quarter of 2022 soared 26% year over year. This is all the more impressive when you bear in mind that 2021 was a banner year for e-commerce businesses.
The stock tanked 75% in 2022 because heavy investment into new warehouses during the lockdown phase of the pandemic led to deep losses when e-commerce demand returned to normal. The important thing to remember right now is that Shopify's new fulfillment network gives its software solutions a competitive edge.
The company reported an operating loss equal to 11% of revenue during the fourth quarter, but I expect its bottom line to enter positive territory again before the end of 2023. In January, the company made big, broad-based price increases of more than 30% for all its subscription-based plans.
Shopify has been a volatile stock in the past, and at the moment it's trading at the sky-high multiple of 264 times trailing-12-month earnings. If we zoom out to a longer timeline, though, we can see that Shopify is currently trading at just 20.8 times the amount it earned back in 2021.
That was a big year, but it won't be the company's best. With a new fulfillment network to justify higher prices for software subscriptions, patient investors could come out miles ahead over the long run.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Cory Renauer has positions in Amazon.com, Global-e Online, and Shopify. The Motley Fool has positions in and recommends Amazon.com, Global-e Online, PayPal, Salesforce, and Shopify. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
