October Stock Market Rallies: A Historical Trend and Investment Opportunities
October has often been a pivotal month for stock market gains, with Shopify and Uber standing out as long-term investment opportunities.
October: A Key Month for Stock Market Rallies
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Historically, October has proven to be a significant month for stock market performance. According to Bespoke Investment Group, nearly one-third of the S&P 500’s 10% rallies since World War II have begun in October. This pattern has led many investors to view the month as an opportune time to enter the market.
One notable example is the bear market of 2022, which ended on October 12. Following that, the S&P 500 surged by more than 60% during the subsequent bull market. Analysts suggest that the momentum of October rallies could be fueled by factors like increased consumer spending during the holiday season. However, while historical trends can provide valuable insight, they are not guaranteed predictors of future market movements.
Regardless of whether an October rally occurs, certain companies, such as Shopify and Uber, remain promising long-term investments.
Shopify: Dominating the E-commerce Software Market
Shopify has emerged as a leader in e-commerce software, offering a comprehensive platform for businesses of all sizes. Merchants can use Shopify’s tools to manage both online and offline sales, including through social media and custom websites. Additionally, Shopify provides adjacent services such as marketing, payment processing, and logistics, making it a one-stop solution for businesses.
Initially focused on small and medium-sized businesses, Shopify has expanded its reach to larger enterprises with its Shopify Plus and Commerce Components offerings. These solutions allow larger brands to adopt parts or the entirety of Shopify’s platform, extending its influence into wholesale and corporate commerce.
Shopify demonstrated solid performance in the second quarter of 2023, reporting a 21% increase in revenue, despite a headwind from selling its logistics business. The company’s non-GAAP earnings surged by 85%, highlighting its growing profitability. Shopify has also made strides in physical retail, wholesale commerce, and international markets, with offline gross merchandise volume (GMV) increasing by 27% and wholesale GMV skyrocketing by 140%.
Wall Street analysts expect Shopify’s earnings to grow at an annual rate of 45% over the next three years, making it an appealing investment option for long-term investors.
Uber: Leading the Ridesharing and Delivery Market
Uber Technologies, a market leader in ridesharing, also operates a significant food delivery business. Its operations are divided into three segments: mobility (ridesharing), delivery (food and grocery delivery), and freight (connecting shippers with carriers).
The company’s ability to integrate its ridesharing and delivery services through a single platform gives it a competitive edge, as it encourages users to engage with both sides of the business.
Uber has successfully leveraged its platform to create cross-promotional opportunities. For instance, 22% of first-time ridesharing trips come from Uber’s delivery app, while 31% of first-time delivery trips originate from the mobility app. This cross-functionality allows Uber to grow its user base across services, making it a leader in both sectors.
In addition to its operational integration, Uber benefits from the proprietary data it collects. This data helps the company predict consumer demand and optimize its services, creating a network effect that strengthens its business over time.
Uber reported strong financial results in the second quarter of 2023, with monthly active platform users growing by 14% and trips increasing by 21%. As a result, the company saw a 16% rise in revenue, reaching $10.7 billion, and a significant increase in GAAP earnings.
Analysts expect Uber’s earnings to grow by 48% annually over the next three years, positioning it as a solid long-term investment.
Conclusion: Shopify and Uber as Long-Term Investment Opportunities
While October may historically be a month of market rallies, savvy investors should focus on the long-term potential of individual companies rather than short-term trends.
Shopify’s leadership in the e-commerce software market and Uber’s dominance in ridesharing and delivery make them strong contenders for sustainable growth.
Whether or not an October rally occurs, both companies are well-positioned to deliver solid returns over the next several years, making them worthwhile additions to any investment portfolio.
Ref Article; The Motley Fool
