There's arguably no better feeling in investing than watching one of your stocks deliver exceptional gains over the course of only a few months. But all too often, investors tend to take profits after that happens -- only to watch those stocks continue to climb.
With that in mind, we asked three top Motley Fool investors to each discuss a stock that has climbed at least 30% so far in 2017, but also stands to continue rising from here. Read on to see why they chose Facebook (NASDAQ:FB), iRobot (NASDAQ:IRBT), and Omeros Corporation (NASDAQ:OMER).
Don't be fooled by Facebook's size
Steve Symington (Facebook): Facebook stock has climbed an impressive 46% so far in 2017 as of this writing, but I don't think it's done outperforming yet.
For one, Facebook's exceptional growth this year has merited that rise. Keeping in mind that two-thirds of the world's 7.6 billion people still don't have access to the internet -- at least, according to the Facebook-led Internet.org initiative designed to solve that problem -- note that Facebook's daily and monthly active users in June both climbed an impressive 17% year over year, to 1.32 billion and 2.01 billion, respectively.
And Facebook is effectively monetizing those users. Revenue last quarter skyrocketed 45% to $9.32 billion, primarily driven by a 47% increase in advertising revenue to just over $9.16 billion. Net income also increased 71% last quarter to nearly $3.9 billion, and diluted earnings per share rose 69% to $1.32.
We also shouldn't forget that these results include only the earliest efforts of Facebook's smaller -- but still enormous -- budding platforms. Instagram -- which the company acquired for $1 billion back in 2012 -- not only now boasts an incredible 800 million users (up from 700 million just five months ago), but also recently reached 2 million monthly advertisers (up from just 1 million in March). Meanwhile, WhatsApp -- which Facebook acquired for a whopping $19 billion in 2014 -- confirmed it has reached more than 1 billion daily active users as of late July.
Few companies can claim this level of global reach and sustained growth potential. And it's obvious Facebook is making strides toward seamlessly converting its massively popular free social media platforms into shareholder value-creating machines. Over the long term, I simply can't envision a world where Facebook's properties aren't an even bigger part of our lives than they are today, and the stock price should continue to respond in kind.
Science fiction becomes science fact
Danny Vena (iRobot): When The Jetsons debuted in 1962, the quirky cartoon about the life of a futuristic family featured numerous devices that seem remarkably similar to real-life versions that exist today. The small robotic vacuum from the show bears a striking resemblance to the Roomba by iRobot.
While the company's stock is up 30% so far this year, its "future" looks even brighter.
iRobot produces a variety of home-cleaning robots, including vacuums, floor scrubbers, and pool cleaners. The entry-level model of its flagship Roomba was the most sold vacuum in the U.S. last year in terms of total retail dollars spent.
While some investors may worry about competition in light of a recent short-seller's report, iRobot has a strong patent portfolio protecting its intellectual property and won a recent victory in an ongoing bid to keep the copycats at bay. The company will be paid an undisclosed sum as part of that settlement, and an investigation by the U.S. International Trade Commission is ongoing regarding several other well-known competitors.
There are reasons to believe that the stock could reach even greater heights. In its most recent quarter, iRobot grew revenue to $183.1 million, up 23% over the prior-year quarter. Revenue from its established U.S. market grew 45%, and Prime Day sales doubled over the prior year. In addition, the company recently acquired its largest European distributor, which it expects to be accretive to earnings by 2018, and iRobot just raised its previously issued financial guidance for the second time this year.
More fuel in the tank
Cory Renauer (Omeros Corporation): My pick has more than doubled its shareholders' money this year. Despite the recent run-up, there could be enough fuel to propel this stock's rocket much higher. Rising sales of this biotech stock's first drug are funding development of another therapy that could generate annual sales that eclipse the company's $940 million market cap.
Most biotechs this size need to fund development of their new drug candidates by selling their own shares, but Omeros has a chance to buck the trend. In the second quarter, sales of this company's first drug to earn approval, Omidria, jumped 71% higher than the same period last year to $17.2 million. Operations lost about $11.9 million during the second quarter this year, but it looks like the company has a chance to reach profitability before ongoing pivotal studies with the company's lead candidate, OMS721, are complete.
Omeros Corporation is developing OMS721 as a potential new treatment for two rare immune disorders that often lead to fatal kidney damage. Although success would make it the only available treatment for immunoglobulin (IgA) nephropathy, it could also compete with Alexion's Soliris for some patients with a related disorder called atypical hemolytic uremic syndrome (aHUS).
Soliris generated about $2.8 billion in sales for Alexion last year, even though quite a few patients with aHUS either don't respond to the pricey treatment or can't tolerate its side effects. Some aHUS patients unable to take Soliris have been successfully treated with OMS721 in early-stage clinical trials, and a repeat performance in larger studies designed to support a new drug application could make this an important option for those with nowhere else to turn. It would also make this stock's run-up so far this year seem minor in comparison.