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Shopify should benefit from the switch to e-commerce thanks to its strong position and competitive edge.
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Vertex Pharmaceuticals' expanding lineup and deep pipeline can help it overcome recent headwinds.
The market's recent correction looks like a massive drop on a year-to-date chart. However, it will look far less daunting in a decade; that's what happens over the long run. Bull markets last longer than downturns. This leads to relatively smooth (though not flawless) northbound trajectories and strong returns for most stocks over a decade or more.
Despite recent market volatility, buying shares of top companies that can at least match average returns through 2035 — or do much better — is still worth it. Here are two excellent candidates: Shopify (NASDAQ: SHOP) and Vertex Pharmaceuticals (NASDAQ: VRTX).
The world is constantly changing and evolving. Many businesses don't last long because they fail to change with it. Take the continued rise of e-commerce: Well-established brick-and-mortar stores have been driven to the brink of bankruptcy (or beyond) as retail transactions increasingly switch to online channels. Shopify is one of the companies helping drive this shift, as it allows merchants to create online storefronts, practically a necessity for success in our modern digital world.
E-commerce should continue growing over the next decade. In the U.S., it accounted for just 16.2% of retail transactions in the first quarter. That number will increase, and Shopify should benefit significantly.
For one thing, the company has been an innovator in its niche of the e-commerce market. It's now a one-stop shop for everything businesses need to start online stores. Shopify provides a slew of services, including marketing, payment processing, inventory management, and much more, so business owners can focus on other things. And it consistently generates solid and rapidly growing revenue.
For another, Shopify has a strong competitive advantage based on switching costs. Having a moat is necessary to perform well over the long run, and Shopify doesn't fall short on this front.
However, it still isn't consistently profitable, and there's stiff competition in the e-commerce market. Meanwhile, an economic downturn could affect transaction volume on its platform and, by extension, its revenue.
Yet Shopify should still perform well in the next decade as it makes headway in the large e-commerce market. Changes it implemented a few years ago — notably, selling its logistics unit — have allowed it to get much closer to profitability. And despite the competition, Shopify has grabbed more than a 12% share (by gross merchandise volume) of the U.S. e-commerce industry.
