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2 split stock growth stocks to buy now | Motley asshole

A stock split has no effect on revenue or earnings, nor does it affect the valuation or market value of the company. But splits can still create some perceived value for investors by making a company’s share price seem affordable. Not everyone has the money to buy a full share of high-priced stocks like Tesla (TSLA -6.92%) or Shopify (store -11.85%) Immediately.

But both companies plan to split their stock in the near term (Shopify plans to do so on June 7 and Tesla only said it will be later this year), and that could lead to some price hikes in the short term.

Of course, short-term tailwinds often make for a poor investment thesis, but both Tesla and Shopify are high-quality businesses with plenty of long-term potential. And with many growth stocks trading deep in bear market territory – Tesla is down 45% and Shopify is down 78% from 52-week highs – a buying opportunity has been created.

Here’s what you should know.

Image source: Getty Images.

1. Tesla

Global electric vehicle (EV) sales more than doubled to 6.6 million in 2021, which is about 9% of all vehicles sold. Despite the increasingly competitive landscape, Tesla achieved its fourth consecutive year as an industry leader, capturing 14.4% of the market share of electric vehicle sales. This number rose to 15.5% in the first three months of 2022.

Despite supply chain problems and rising costs, Tesla managed to deliver 310,000 vehicles in the first quarter, up 68% from the previous year. In contrast, revenue rose 73% to $62.2 billion over the past year. Even better, the company posted an industry-leading operating margin of 15.5%, and free cash flow rose 188% to $6.9 billion. Over time, Tesla should become more efficient as production ramps up at its new plants in Berlin and Texas.

Despite the massive sell-off in shares, valuation remains the biggest risk to Tesla investors. The shares trade with a 12.1x sales ratio, which is much higher than most other automakers. But when you open the hood, Tesla bears little resemblance to the old automakers. It was built from the ground up to produce electric cars, which means it doesn’t have to invest billions of dollars to retrofit outdated factories. On top of that, Tesla has built a reputation for its expertise in semiconductors, artificial intelligence, and robotics, and the company has positioned itself in the lead in the race to build a self-driving car.

In fact, CEO Elon Musk believes Tesla will have a functional version of its fully autonomous driving (FSD) program this year, and the company already has a dedicated robotics in the works. The vehicle will be optimized for autonomy and low-cost transportation, and is scheduled for mass production by 2024. This paves the way for Tesla to launch an autonomous passenger service, and enter a market that could generate $2 trillion in annual profits, according to Ark Invest.

perhaps more interesting, Morgan Stanley Analyst Adam Jonas believes that Tesla will eventually enter the field of electric vertical take-off and landing (eVTOL), which could reach $9 trillion by 2050. Collectively, this puts Tesla ahead of the huge opportunities in the market, which is why investors who have Long time horizon Consider buying this growth stock when it’s up for sale.

2. Shopify

Shopify enables merchants to run a direct-to-consumer business via physical and digital channels. Its software enables sales and inventory management across physical stores, branded websites, online marketplaces and mobile apps, all from a single platform. Shopify also provides complementary payment processing, shipping, and marketing services, as well as thousands of integrations through the Shopify App Store.

This comprehensive approach to commerce has helped Shopify win over 2.1 million businesses. Even better, Shopify ranks as the most popular e-commerce software vendor in terms of user satisfaction and market presence, and the company captured 10.3% of the market share in US e-commerce sales last year, up from 8.6% the year before.

In the first quarter, headwinds such as rising costs and unrealized losses in equity investments slowed revenue growth, but Shopify continued to gain market share in both physical and digital commerce. On top of that, Shopify has still been delivering solid financial results over the past year. Revenue grew 40% to $4.8 billion, and generated $254 million in free cash flow.

From now on, contributors have a lot of things to get excited about. The company’s ability to innovate has helped keep it at the forefront of the merchandising industry, and its ambition to democratize catering to merchants’ needs seems like a game changer. On that note, Shopify plans to acquire delivery as a Deliverr service provider for $2.1 billion. This deal will speed up the building of the Shopify Fulfillment network, eventually allowing Shopify merchants to offer one or two-day delivery across the US

At the moment, the stock is trading at 9.6 times sales – close to its cheapest valuation in the past five years – so now is the time to buy this growth stock.

2022-05-24 11:40:00

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