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I think these are the best shares to buy now for the next stock market rally

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With consumer spending seemingly falling off a cliff, the discretionary retail sector is having a pretty tough time. This is especially true when looking at e-commerce stocks. Even the best have watched their share prices tumble since last year.

While the fears surrounding a 2023 recession aren’t unfounded, it’s far from guaranteed. But even if the worst comes to pass, there is a refuge in knowing that the stock market has a perfect track record of recovery. And as all investors know, buying high-quality businesses at dirt-cheap valuations is a recipe for enormous long-term wealth generation.

With that in mind, I believe these two e-commerce businesses could be some of the best shares to buy now before the eventual rally.

Is Shopify one of the best shares to buy now?

Shopify (NYSE:SHOP) reached a pretty lofty valuation last year. And even after collapsing by nearly 80% over the previous 12 months, the business still trades at a premium.

As a quick reminder, the group operates an online platform that enables individuals and businesses to establish an online storefront. However, over the years, its product offerings have expanded. And it now includes a sales analytics platform, payment processing solutions, as well as issuing small business loans. Moreover, the company recently completed an acquisition to provide customers access to an enormous logistics network.

Today, most of the revenue stream comes from processing payments for websites built on its platform. And therefore the drop in consumer spending obviously poses a serious threat to the top-line income.

Pairing this with the stiff competition from companies like Amazon only adds more pressure. But with just under $7bn in cash on its balance sheet, I believe this business has more than enough liquidity to survive a potential recession.

The share price will undoubtedly be volatile over the next year. But once things eventually begin to normalise, I have a hunch the company can resume its impressive growth trajectory seen since I initially invested in 2017. That’s why I believe it may be one of the best shares to buy now for my portfolio.

Another fallen-from-grace e-commerce stock

Much like Shopify, ETSY (NASDAQ:ETSY) hasn’t had a great run lately. In fact, the growth stock is down around 44% over the past year.

The e-commerce company operates an online platform that enables individuals to sell products. But what differentiates it from other similar platforms like eBay is the community. Items found on ETSY are almost exclusively unique hand-crafted artisan products. As such, it’s rare to find the same stuff on other platforms or in brick and mortar stores.

The group generates revenue by charging fees for listing and selling products. And since it’s largely home to discretionary items, the drop in consumer spending means demand is currently being impacted. In fact, the slowing growth is one of the main reasons why the stock dropped so sharply this year.

Operating in a recession is obviously going to be challenging for ETSY. But with over $1bn of cash at its disposal, I believe the business can equally survive the economic turmoil. And with its niche firmly secured within the e-commerce space, these could be the best shares to buy more of in my portfolio today. At least that’s what I think.

The post I think these are the best shares to buy now for the next stock market rally appeared first on The Motley Fool UK.

Should you invest £1,000 in Etsy, Inc. right now?

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Zaven Boyrazian has positions in Etsy and Shopify. The Motley Fool UK has recommended Etsy and Shopify. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.