November has been the strongest month of the year for the US stock market over the past decade. In particular the S&P500 index (SNPINDEX: ^GSPC) over the past ten years, an average of 3.8% was achieved in November, while July was the next best month with an average return of 3.4%. Moreover, the index has delivered positive returns in nine of the past ten Novembers.
Of course, past performance is never a guarantee of future results, and investors should never focus on short-term returns. But there is no harm in getting stuck in historical patterns, provided the goal is long-term capital growth. Shopify (NYSE: STORE) And Uber Technologies (NYSE:UBER) are valuable investments today, and both stocks cost less than $100 per share.
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Here are the important details.
Shopify offers a turnkey solution for retail and wholesale. This platform allows sellers to manage sales and inventory across physical and digital stores from a single dashboard. The software integrates with online marketplaces such as Amazon and social media such as TikTok, but also supports the construction of custom websites.
Shopify also offers adjacent merchant solutions for marketing, payments, and logistics, as well as back-office tools for cash management, accounts payable, and tax reporting. The company has also introduced a suite of artificial intelligence (AI) features called Shopify Magic that automate workflows (such as creating product descriptions) and deliver insights for sellers.
Additionally, the Shopify Plus enterprise platform includes more advanced tools for data analysis and wholesale e-commerce. That last point is particularly important because the wholesale e-commerce market is about three times larger and growing twice faster than the retail e-commerce market, according to Grand View Research.
Recent consultancy firm Gartner called Shopify a leader in digital commerce, citing its robust functionality across retail and wholesale channels and its ability to innovate quickly. In the same way, Forrester research recognized Shopify as a leader in its most recent wholesale solutions report, citing its broad functionality and new AI tools as key strengths.
Shopify reported encouraging financial results in the second quarter, despite a somewhat uncertain economic backdrop. Revenue rose 21% to $2 billion, and non-GAAP net income rose 85% to $0.26 per diluted share. Importantly, management highlighted momentum among large sellers, international sellers and offline sellers, three areas where Shopify has focused its resources.
Going forward, Wall Street expects Shopify’s adjusted profits to grow 26% annually through 2027. That consensus estimate makes the current valuation of 75 times adjusted earnings seem acceptable. Let me be clear: Shopify isn’t cheap at its current price, but I still think the stock can outperform the market over the next five years.
Uber operates the largest ride-share platform in the US and globally (outside China), and operates the second largest food delivery platform in the US. The company has a key advantage in its ability to combine these services into a single mobile app as it creates cost-efficient cross-sell opportunities. For example, 31% of the first delivery trips come from mobility users, and 22% of the first mobility trips come from delivery users.
Scale provides Uber with a data advantage that supports continuous improvements in trip planning, route planning and pricing. The company also uses its scale and data to help advertisers reach consumers with relevant offers through its mobile app. In June, Piper Sandler Analyst Tom Champion called Uber a “sleeping giant” because its size lays the foundation for a thriving advertising business.
Uber reported strong financial results in the third quarter, beating expectations on the top and bottom lines. The number of monthly active users increased by 13% and the total number of rides increased by 17%, meaning consumers were using the platform more often. Revenue rose 20% to $11.2 billion and GAAP net income increased tenfold. But adjusted EBITDA, a better measure because it eliminates unrealized investment gains, rose 55% to $1.7 billion.
During the earnings call, CEO Dara Khosrowshahi told analysts that Uber One memberships rose 70% in the past year to 25 million. He also mentioned that advertising revenues have increased by 80% and spoke optimistically about the company’s extensive collaboration with Alphabet subsidiary Waymo. Specifically, Uber and Waymo are working together to bring autonomous ride-sharing to Atlanta (Georgia) and Austin (Texas) next year.
Wall Street expects Uber’s revenues to grow 22% annually through 2027. Compared to that consensus, the current valuation of 36 times earnings seems reasonable. Patient investors should feel comfortable buying a position in Uber stock today, although it would be wise to start with a small position and build it up over time.
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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. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Trevor Jennevine has positions at Amazon and Shopify. The Motley Fool holds positions in and recommends Alphabet, Amazon, Shopify and Uber Technologies. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
History Says the S&P 500 Could Jump in November: Two No-Brainer Stocks to Buy Now with $100 was originally published by The Motley Fool
