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The stock indexes are at record highs, and with that, many one-time bargains are no longer available at low valuations. Such conditions could persuade investors to seek returns in other investment vehicles.
Ultimately, we do not know when the current bull market will end. Still, perhaps the most surprising thing about the rally is that it has affected relatively few names. This means you can find growth stocks in bear market territory, down by 20% or more. Knowing that, it may be time to consider these three stocks.
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MercadoLibre (NASDAQ: MELI) has long beaten the odds by turning adversity into opportunity. The company's Mercado Pago, Mercado Credito, and Mercado Envios business segments came about to solve customer problems while turning into additional revenue sources for the e-commerce conglomerate.
However, last year the stock suffered as increased competition from Amazon and much smaller e-retailers squeezed its margins. Also, its efforts to aggressively expand loan volumes led to a high level of borrower defaults.
The company has addressed its e-commerce struggles by increasing sales. It has also turned to artificial intelligence (AI) and loan limits to mitigate its loan losses.
In the first quarter of 2026, revenue of $8.8 billion rose by 49% annually. That followed a 39% revenue increase in 2025. Nonetheless, net income came in at $417 million, a 16% decline over the same period amid continued margin and loan default struggles. That came after reporting profit growth of just 5% in 2025.
Still, with 34% revenue growth predicted for 2026, the company is not slowing very much. Also, thanks to the 30% decline from all-time highs, its P/E ratio is now 47, a level that compares well to where Amazon was during its growth phase. Given its current growth, the 30% drop helps make the case that it's a strong investment in Latin America's e-commerce boom.
Pet supply retailer Chewy (NYSE: CHWY) grew to prominence during the pandemic. The e-retailer stood out for competing with Amazon on price and providing a higher level of customer service than other retailers.
Unfortunately, like many stocks, Chewy cratered after the pandemic subsided and customers returned to their previous shopping habits, and it never recovered. Currently, it is down almost 80% from its all-time high.
Nonetheless, it may surprise investors that Chewy's growth never stopped, even as customers returned to in-store retailing.
That pattern has continued into fiscal 2025 (ended Feb. 1), as net sales of $12.6 billion grew by 6% year over year, and its operating income surged by 125% as Chewy kept expense growth in check. In contrast, comprehensive income fell to $224 million in fiscal 2025 from the year-ago figure of $394 million, though a $204 million tax benefit skewed that result.
Additionally, net sales are set to grow 9% in fiscal 2026. That could bode well for this stock, which remains range-bound.
Moreover, its 45 P/E ratio is on track to give way to a forward P/E ratio of 15. Such conditions could be the long-awaited catalyst that takes Chewy stock higher.
Shopify (NASDAQ: SHOP) is another one-time highflier that has been taken down by unexpected headwinds. It has built an e-commerce ecosystem that has made it primarily a one-stop shop for merchants of all sizes to manage e-commerce platforms and most of the tasks necessary to keep an e-retailer successful.
Shopify has found that running AI models comes at a high cost. Moreover, industry analysts have become worried that AI tools could create an ecosystem more cheaply, casting platforms like Shopify's aside.
Fortunately, as previously mentioned, Shopify has become an ecosystem. With all of the tasks it can perform, competing is not as simple as having an AI engine create a platform.
In the first quarter of 2026, revenue of almost $3.2 billion increased by 34% year over year, slightly ahead of the 30% annual growth in 2025. Also, operating income in Q1 was up 88% as it kept costs in check. Still, a write-down of equity investments led to a Q1 net loss.
Also, the company predicts revenue growth in the high-20% range in Q2, and analysts forecast 28% growth for fiscal 2026. This modest slowdown also appeared to disappoint investors, as the stock is down by over 40% from its all-time high.
They also might perceive its 110 P/E ratio as an overvaluation. Nonetheless, its 62 forward P/E ratio seems more justified given the growth, and that could help spark a recovery in Shopify stock over time.
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Will Healy has positions in MercadoLibre and Shopify. The Motley Fool has positions in and recommends Amazon, Chewy, MercadoLibre, and Shopify. The Motley Fool has a disclosure policy.
3 Growth Stocks Down 20% to Buy Right Now was originally published by The Motley Fool