Shopify (SHOP 4.12%), Lumentum (LITE 1.33%), and bluebird bio (BLUE 7.95%) are three of the most promising stocks on my watchlist to buy right now. These three companies have very different businesses, but each one has catalysts coming that could fuel future growth and make them winning investments worth buying now.
Monetizing mobile shopping
Amazon.com (AMZN 0.16%) may get the headlines, but it's not the only company transforming retail through e-commerce. For instance, Shopify helps brick and mortar and e-commerce companies create and successfully manage online brands, and as more shoppers use mobile devices to buy products, Shopify's ideally positioned for upside.
IMAGE SOURCE: GETTY IMAGES.
Shopify makes its money through monthly subscriptions that increase when retailers upgrade to get greater functionality, but transaction processing is its fastest-growing business.
Retailers use Shopify to optimize their online stores, manage complex marketing, track inventory, and analyze data, and last quarter, sales grew 75% year over year to $127 million. Fueling its growth was a 60% increase in subscription revenue to $62 million and an eye-popping 92% increase in merchant services revenue to $65 million.
Overall, the amount in gross merchandise volume processed on Shopify's platform improved 81% from the same quarter in 2016 to $4.8 billion, and gross payments volume was $1.8 billion in the quarter, accounting for 38% of all merchandise volume. For comparison, gross payments volume was only $1 billion in the same quarter of 2016.
While Shopify already works with thousands of retailers, the potential to continue growing sales, and eventually turn a profit, is big. According to the U.S. Census Bureau, e-commerce sales were $106 billion in Q1, yet that represented less than 9% of all retail sales in America during the quarter. With e-commerce sales up 15% in the past year, and total retail sales of over $1.25 trillion in the first quarter alone, Shopify's peak opportunity is huge.
Next big thing in smartphones?
Lumentum Holdings makes technology that enables consumer devices such as smartphones to do 3D sensing, and rumors are that next-generation devices by top device makers such as Apple Inc. are embracing its solution.
3D sensing involves passing an infrared light through an optical element to spread light into a pattern or sheet of light that can be reflected back to a device, captured, and analyzed for shape and movement.
Microsoft's Kinect has used this kind of gesture control to enhance the user experience for years, and the incorporation of next-generation 3D-sensing technologies could provide a better user experience for smartphone and tablet users, too. Users could use 3D sensing to gain greater control over their entertainment systems, create additional security by using facial recognition, control devices from a distance without physically touching them, and incorporate their image and surroundings into gaming. 3D sensing could also be used to enhance video and picture taking.
Until now, incorporating this technology into small devices has been hamstrung by battery-draining energy consumption, but Lumentum's on the cusp of changing that. Recently, the company told investors it's scored a big order that will begin delivery in the third quarter and said demand for 3D sensing will add "meaningful revenue in our next fiscal year."
Lumentum hasn't said what company placed this order, but it's confident that this part of its business is going to grow quickly. Currently, revenue in its industrial and consumer business, which consists primarily of revenue from 3D-sensing and laser diodes for fiber lasers, represents only a small proportion of its $255 million in quarterly sales. Therefore, rapid growth could prove to be very profit friendly.
Revolutionizing multiple myeloma treatment
At the high-profile American Society of Clinical Oncology (ASCO) annual meeting this week, bluebird bio updated investors on the progress it and collaboration partner Celgene Corp. (CELG) are making on bb2121, an entirely new approach to fighting multiple myeloma.
The approach involves removing patient T-cells, reengineering them using a neutered HIV-1 virus to find B-cell maturation antigen (BMCA), a protein expressed by multiple myeloma cells, and reinserting these "smart" cells back into the patient to find and destroy this cancer.
At ASCO, the company released data showing a 100% overall response rate to bb2121 -- including 27% who were complete responders -- without dose-limiting toxicity. The high response rate is particularly exciting because patients in the trial were heavily pre-treated, averaging seven prior lines of therapy each.
Admittedly, bb2121's results were from a small, early-stage trial, so a lot more research is needed before we know for sure it's effective and safe. Nevertheless, this is a major market opportunity, and this data is good enough for me to want to pay very close attention to bb2121 in future trials, because if these additional trials pan out, it could be needle-moving for bluebird bio.
Celgene already markets the $7 billion-per-year multiple myeloma drug Revlimid, the most widely used first- and second-line therapy, and the $1 billion-plus-per-year Pomalyst, a fast-growing third-line therapy. Its dominance in the indication suggests it could turn bb2121 into a blockbuster, and bluebird bio could share equally in that success if it exercises an option to co-commercialize bb2121. Celgene's also on the hook to pay bluebird bio up to $230 million in fees and clinical and regulatory milestone payments if bb2121 is a success.
Given the potential to disrupt multiple myeloma treatment, and its relationship with Celgene, this upstart could be one of the most interesting stories in clinical-stage biotech.
