Chronicle Journal: Finance

4 Stocks to Buy During a Second Market Crash

Many market experts expect a second market crash with the second wave of coronavirus making its presence felt and the inability of Congress to reach an agreement on a second stimulus package. However, companies that have shown resiliency so far amid the pandemic are likely to keep thriving based on their enhanced ability to function well in the “new normal.” MercadoLibre (MELI), Sea (SE), NXP (NXPI), and Pinterest (PINS) are four such stocks that have gained significant momentum amid the pandemic and they should be able to keep their momentum alive if there is a second market crash.

Many market experts expect a repetition of the March market crash with the economy being in danger of the second wave of coronavirus and the uncertainty surrounding the second fiscal stimulus. The economy which is already reeling under the impact of the pandemic could witness further pain especially if lockdowns become necessary.

There are increased concerns as the second wave in Europe was worse than the first by many measures. And, if things move in that direction, the market could crash further with the economy entering a deeper recessionary phase.

However, companies that have adapted to the new normal business activities, should be able to stay afloat. While the tech giants have been facing regulatory hurdles, some smaller players in the tech and e-commerce space should benefit significantly based on their pandemic-perfect offerings.

MercadoLibre, Inc. (MELI), Sea Ltd. (SE), NXP Semiconductors N.V. (NXPI), and Pinterest, Inc. (PINS) are four such stocks that have proved their mettle in the past and are set to witness solid growth even if there is a second market crash.

MercadoLibre, Inc. (MELI)

Based in Argentina, MELI is a leading e-commerce giant in Latin America. The company is present in 18 countries including Argentina, Brazil, Mexico, Colombia, Chile, Venezuela, and Peru. The e-commerce giant has expanded into various domains. Namely, MELI provides MercadoLibre Marketplace to enable businesses to facilitate sales, MercadoPago FinTech to simplify online payments, and MercadoShops, a software-as-a-service (SaaS) to enable users to manage their websites.

MELI’s net revenues increased 123.4% year-over-year to $878.4 million for the second quarter ended June 2020. The gross merchandise volume (GMV) increased by 48.5% year-over-year to $5 billion. Total payment volume (TPV) through Mercado Pago increased 72.1% year-over-year to $11.2 billion. Mobile wallet delivered $2.1 billion in transactions, leading to a 373.2% year-over-year growth. Net income for the company came in at $55.9 million, resulting in net earnings per share of $1.11, which surpassed the consensus estimate by 1133.3%.

With half the population in Latin America lacking bank accounts, the market has huge growth potential. Analysts expect MELI’s revenue to increase by 61% for the about-to-be-reported quarter and 36% next year. The company’s EPS is expected to increase 131.5% in 2020, 105.1% in 2021, and at a rate of 20.5% per annum in the next five years.

The company opened its first fulfillment centers in Chile and Colombia in the second quarter. MELI recently enabled PayPal for cross-border transactions on Mercado Libre in Brazil and Mexico and it is also available at Mercado Pago’s online checkout for foreign shoppers. The stock has gained 112.6% year-to-date and is currently trading 11.7% below its 52-week high.

How does MELI stack up for the POWR Ratings?

A for Trade Grade

B for Buy & Hold Grade

A for Peer Grade

A for Industry Rank

B for Overall POWR Rating

The stock is also ranked #7 out of 58 stocks in the Internet industry.

Sea Ltd. (SE)

Based in Singapore, SE offers digital entertainment and e-commerce services in Southeast Asia. The local leader operates through three businesses: Garena, which is a leading online games developer and publisher, Shopee which is an e-commerce platform, and SeaMoney which offers digitizing payments and financial services. The company is also backed by Tencent Holdings.

SE’s adjusted revenue increased by 93.4% year-over-year to $1,287.2 million for the second quarter ended in June 2020. The digital gaming and the e-commerce segment were the main revenue drivers for the company. Quarterly active users (QAUs) for the digital entertainment segment reached 499.8 million, up 61% year-over-year. The E-commerce segment’s Gross merchandise value (GMV) increased 109.9% year-over-year to $8.0 billion. SE’s total gross profit increased by 106.1% to $200.8 million.

Analysts expect SE’s revenue to increase 82.5% for the about-to-be-reported quarter, 72.4% in the current year, and 39.9% next year. The company’s EPS is expected to increase by 45.7% next year. The stock has gained 297% year-to-date. It is currently trading just 6.3% below its 52-week high of $176.90 which it reached on October 14th.

Last month, Shopee and Visa (V) signed a five-year regional strategic partnership to accelerate Southeast Asia’s digital economy. The leading e-commerce platform also launched Shopee premium where shoppers can find a curated selection of premium beauty and fashion brands such as Ralph Lauren and Calvin Klein. Garena announced the fully-virtual Free Fire Continental Series’ (FFCS) international tournament for 2020 whose grand final is expected to be held at the end of November.

SE’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade, Peer Grade, Industry Rank, and a “B” for Buy & Hold Grade. Among the Internet industry, it’s ranked #8.

NXP Semiconductors N.V. (NXPI)

Headquartered in Eindhoven, Netherlands, NXPI offers various semiconductor products. Operating in over 30 countries, the company’s product solutions are at the heart of every advanced technology. The product portfolio includes but is not limited to microcontrollers, application processors, communication processors, and wireless connectivity solutions.

NXP’s revenue increased 25% sequentially to $2.27 billion for the third quarter ended September 2020. The revenue from the Industrial & IoT segment increased 21% year-over-year to $514 million owing to a boost in demand with the rapid digital transformation. Even the revenue from the Mobile segment increased 5% year-over-year to $337 million. The gross margin was 50.1%, while the operating margin was 25.8%.

Analysts expect NXPI’s revenue to increase by 6.6% for the fourth quarter ending December 2020 and 13% next year. The company’s EPS is expected to increase by 5.5% in the fourth quarter, 34.9% next year and at a rate of 9.4% per annum in the next five years. The company’s earnings per share for the last reported quarter of $1.62 surpassed the consensus estimate by 5.2%. NXPI’s earnings surprise history looks impressive with the company missing the consensus estimate in just one of the trailing four quarters.

Last month, NXPI with the NFC technology powered the new Xiaomi PonPon Tile 2.0 Stickers to connect to the smart home and make it easier for the consumers. Volkswagen adopted NXPI’s Battery Management System (BMS) to accelerate its development in the Electrical Vehicles (Evs) market. NEC Corporation selected NXPI’s RF Airfast multi-chip module for the Massive MIMO 5G antenna Radio Unit (RU) for Rakuten Mobile, one of Japan’s leading mobile network operators. The stock has gained 7.9% year-to-date and is currently trading 4.5% below its 52-week high.

It’s no surprise that NXPI is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade and a “B” for Industry Rank. In the 86-stock Semiconductor & Wireless Chip industry, it is ranked #4.

Pinterest, Inc. (PINS)

A leading social media company and a visual discovery engine, PINS have over 400 million active users today. Headquartered in San Francisco, California, the company engages in pinboard-style photo-sharing website operations and shows recommendations based on the people’s personal tastes and interests.

PINS reported a strong third quarter (ended September 2020). Revenue increased 58% year-over-year to $443 million due to higher advertiser demand. Global Monthly Active Users (MAUs) increased 37% year-over-year to 442 million. Its key metric Average Revenue per User (ARPU) increased 15% year-over-year to $1.03.

Analysts expect PINS’ revenue to increase 57.2% for the about-to-be-reported quarter, 40.3% in the current year, and 38.6% next year. The company’s EPS is expected to increase 116.7% in the fourth quarter, 152.9% next year and at a rate of 152.3% per annum in the next five years.

PINS integrated with Microsoft Edge last month so that users can find relevant pins more easily. The company launched the Pinterest widget for iOS 14. Moreover, PINS launched ads alongside visual search results to monetize this growing demand of the advertisers.

The company’s earnings surprise history looks impressive missing the consensus estimate in just one of the trailing four quarters. The stock has gained 219.6% year-to-date. It is currently trading 15.7% below its 52-week high.

PINS’ strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” in Trade Grade, Peer Grade, and Industry Rank and a “B” in Buy & Hold Grade. 

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MELI shares were trading at $1,298.85 per share on Wednesday afternoon, up $64.88 (+5.26%). Year-to-date, MELI has gained 127.10%, versus a 8.38% rise in the benchmark S&P 500 index during the same period.



About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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