Why October Could Be the Month for a Stock Market Rally: Shopify and Uber as Key Investments
October has often proven to be fertile ground for stock market gains. Historically, the S&P 500 has seen gains of at least 10% in 61 instances since the end of World War II, one-third of which began in October, according to Bespoke Investment Group. One recent example is the bear market that began in January 2022 and concluded in October of the same year, leading to a subsequent surge of over 60%.
No one can predict the future with certainty, but two growth stocks—Shopify and Uber Technologies—are poised to do well, regardless of market fluctuations. Here’s why they’re worth considering for your long-term portfolio.
Shopify: A Leader in E-Commerce
Shopify is a titan in the realm of commerce software, providing an integrated platform that allows businesses to manage sales across multiple channels, from physical retail to online marketplaces and social media outlets. Additionally, Shopify offers merchant solutions in marketing, payments, and logistics, making it a go-to platform for businesses of all sizes. Originally catering to small and medium-sized businesses, Shopify is now expanding its reach to larger enterprises through offerings like Shopify Plus and Commerce Components.
In its most recent quarter, Shopify reported a revenue increase of 21% to $2 billion, even with a 4% impact from the sale of its logistics business. Adjusted earnings per share surged by 85% to $0.26. The company is not only growing online but also making significant strides in physical retail, wholesale commerce, and international markets. Offline gross merchandise volume rose by 27%, and wholesale GMV soared by 140%, both outpacing the 22% growth in total GMV.
With Wall Street projecting a 45% annual increase in earnings over the next three years, Shopify’s current valuation at 82 times earnings appears justified. Long-term investors who buy in now may find themselves handsomely rewarded five years down the line.
Uber Technologies: Dominating Ridesharing and Delivery
Uber divides its business into three main segments: mobility, delivery, and freight. It operates the leading ridesharing platform and the second-largest food delivery service in the U.S. What sets Uber apart is its integrated platform that offers both ridesharing and delivery services, encouraging users and drivers to engage with both segments.
Additionally, Uber leverages proprietary data to enhance user experience and drive effective advertising. In its latest quarter, Uber’s monthly active platform consumers rose by 14% to 156 million, with trips increasing by 21% to 2.7 billion, driving a revenue increase of 16% to $10.7 billion. Uber also reported a significant jump in GAAP earnings, which increased by 161% to $0.47 per diluted share.
Wall Street expects Uber’s earnings to grow at 48% annually over the next three years, making its current valuation of 84 times earnings seem reasonable. Investors looking for long-term growth may want to consider adding Uber to their portfolios and holding it for at least three to five years.
Final Thoughts
While historical trends are not guarantees, the coming month shows potential for a market uptick. Even if a rally doesn't materialize, Shopify and Uber offer solid growth prospects that make them valuable additions to any long-term portfolio. Consider taking a small position in these stocks and watching them grow over the years.
