Has the stock market bottomed out? The latest inflation data has helped lift stocks, but the truth is the economy is not out of the woods yet. Some economists predict that a recession could be imminent and that geopolitical problems also remain. No one can say for sure that stock market indices won’t sink even deeper.
But a bull market will eventually come – it always does. Let’s look at two stocks worth holding when this happens: Eli Lily (THERE IS 1.75%) and Shopify (STORE -3.55%).
1. Eli Lily
Eli Lilly is currently beating the market, with shares up 29% year-to-date.
The company does not owe this performance solely to its financial results. Third-quarter Eli Lilly revenue increased 2% year-over-year to $6.9 billion; the drugmaker’s revenue jumped 7% year-over-year in constant currency terms. Ultimately, Eli Lilly’s adjusted earnings per share (EPS) came in at $1.98, up 12% from the year-ago quarter.
Perhaps Eli Lilly’s most crucial growth driver has been the progress of its pipeline. The company got a major endorsement this year and is working on other exciting candidates. The approval in question was for Mounjaro, a treatment for type 2 diabetes. Analysts place high hopes on this drug. Between its current indications and potential label expansions in treating obesity and other conditions, some experts believe it will reach peak annual sales of $25 billion.
For context, rheumatoid arthritis drug Humira, the best-selling drug in industry history, peaked in sales at $20.7 billion last year. There are other key programs in Eli Lilly’s pipeline. They include donanemab, a potential therapy for Alzheimer’s disease, and Basal Insulin-FC, an experimental weekly product for diabetes.
During the third quarter, the drugmaker filed an application for lebrikizumab, a potential treatment for atopic dermatitis, with regulatory authorities in the United States and Europe. Of course, some of Eli Lilly’s existing products continue to perform well, including the immunosuppressant Taltz, the cancer drug Verzenio and the diabetes drug Trulicity. In the third quarter, Taltz sales increased 15% year over year to $679.9 million.
Verzenio’s revenue climbed 84% year-over-year to $617.7 million, while Trulicity’s reached $1.9 billion, 16% higher than a year ago. a year. Eli Lilly’s new products will replace old ones, such as the cancer drug Alimta, which is facing generic competition and losing market share. Eli Lilly’s prospects are strong thanks to its deep pipeline, and the pharmaceutical company is well positioned to continue beating the market.
2.Shopify
Shopify’s stock is down 71% this year. The e-commerce specialist struggled due to slowing revenue growth and a bleak outlook related to macroeconomic challenges. However, it is essential to put these challenges in context. Shopify’s declining revenue growth rates are hardly surprising, given what has happened over the past three years.
The company benefited from a coronavirus-related tailwind in 2020 and 2021, when people shopped more online due to the pandemic. Once the outbreak slowed and shopping habits returned to some semblance of pre-pandemic normalcy, it created some tough year-over-year comparisons for Shopify.
And while a recession could hurt Shopify, the company continues to make tremendous strides in helping build and manage thousands of online storefronts for small businesses around the world. In the third quarter, Shopify’s gross merchandise volume (GMV) — the total value of transactions on its platform — rose 11% year-over-year to $46.2 billion.
Shopify’s GMV is still moving in the right direction, indicating that its strong business can handle economic downturns. The company’s revenue in the period rose 22% year-over-year to $1.4 billion, while its adjusted net loss was $0.02, versus adjusted EPS of $0.08 recorded in the third quarter of 2021.
There is a strong argument that Shopify may continue to struggle with the market and the economy. Its spending is increasing, and with consumers still in control of spending, revenue growth for next year may not be as impressive as before. The company’s continuing net losses won’t help its cause either.
However, Shopify is laying a solid foundation for the future by providing businesses with everything they need to run their online and physical operations. The company offers thousands of apps to help merchants personalize their stores, as well as an order fulfillment network, inventory services and more.
These related services make it difficult for Shopify customers to look elsewhere, giving the company’s platform high switching costs a powerful competitive advantage. Once the economy recovers, look for consumers to increase their spending, which should help increase GMV and company revenue.
With plenty of room for growth in e-commerce, including overseas, Shopify will be able to take advantage of the investment it is currently making to capture a good chunk of this massive global opportunity. Despite its poor performance this year, Shopify has crushed the market since its IPO in 2015. In my opinion, it can do it again for investors with a long enough horizon.
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