3 Growth Stocks Down 20% to Buy Right Now

MercadoLibre posted Q1 2026 revenue of $8.8 billion, up 49% year over year, though net income fell 16% to $417 million amid margin pressure and loan defaults. Chewy reported fiscal 2025 net sales of $12.6 billion, up 6%, with operating income surging 125%, while Shopify Q1 2026 revenue rose 34% to nearly $3.2 billion and operating income jumped 88%, despite a net loss from investment write-downs. The article argues these pullbacks may be opportunities given still-strong growth and improving profitability, but it is largely opinionated commentary rather than a direct catalyst.

Analysis

The market is rewarding businesses where growth is still outrunning the drag from reinvestment, but the second-order signal is different across the three names. MELI is the cleanest “quality growth with operating noise” setup: defaults and margin pressure are a real overhang, yet the core commerce and payments flywheel is still compounding fast enough that earnings should inflect once credit costs normalize. CHWY looks even more interesting tactically because its operating leverage is beginning to show up before the market has re-rated the stock; when a retailer moves from top-line skepticism to margin credibility, the multiple often rerates faster than the revenue trajectory alone would justify.

SHOP is the most interesting contrarian case. Investors are clearly discounting AI-driven commoditization of storefront software, but that framing misses the stickiness of the workflow stack and switching costs embedded in payments, fulfillment, and merchant data. If AI lowers basic site-build costs, it may compress entry-level competition, but it can also increase the value of the platform that orchestrates the commerce layer; that favors the incumbent ecosystem rather than weakening it. The bigger issue is valuation sensitivity: even strong growth can be punished if the market keeps demanding proof that AI spend is translating into durable incremental gross profit.

The underappreciated risk across all three is timing mismatch. These are names where the catalyst horizon is months to years, while sentiment can swing in days on loan-loss prints, guidance, or any hint of deceleration. AMZN is the main indirect loser if MELI and SHOP continue taking share in their niches, but it also remains the competitive ceiling that prevents these companies from fully re-rating on growth alone. The setup argues for owning the names where operating leverage is improving faster than expectations, and avoiding the temptation to chase the highest-multiple exposure without a clear earnings bridge.

Key Decisions for Investors

• Long CHWY vs. short AMZN on a 3-6 month horizon: CHWY has the cleaner operating leverage story, while AMZN remains the default competitive reference point; target a 15-20% relative outperformance if CHWY keeps converting sales growth into margin.
• Buy MELI on pullbacks rather than strength, with a 6-12 month view: use credit-loss headlines as entry points, because the market is likely over-penalizing near-term default noise relative to the long-term payments/e-commerce cross-sell opportunity.
• Initiate a tactical long in SHOP via call spreads 6-9 months out: the goal is to express upside from multiple repair if AI fears fade; cap downside by avoiding outright equity exposure at the current valuation.
• Pair CHWY long against SHOP short for a relative-value trade if you want lower-duration exposure: CHWY offers nearer-term evidence of earnings leverage, while SHOP remains more vulnerable to valuation compression if growth merely stays good instead of accelerating.
• Set a hard stop on all three if forward growth revisions roll over for two consecutive quarters: these names are being priced on future compounding, so the risk/reward deteriorates quickly if guidance stops supporting the narrative.