Disney has come a long way since its initial public offering in 1957, building a global multimedia empire that spans movies, television, and theme parks. It's also taken shareholders on an incredible ride and been a life-changing investment vehicle for those who had the foresight to buy early and settle in for the long haul.
With that kind of trajectory in mind, we asked a panel of Motley Fool investors to profile a company that still has the potential for huge new growth phases that could translate into big wins for investors. Read on to see why they think Mazor Robotics (NASDAQ:MZOR), Netflix (NASDAQ:NFLX), and Shopify (NYSE:SHOP) are stocks that have the potential to be kingdom builders.
An emerging player in the growing robotic surgery space
Chuck Saletta (Mazor Robotics): Ever since Intuitive Surgical (NASDAQ:ISRG) burst onto the scene with its robotic da Vinci surgical system, it has been clear that there is demand for robotic-assisted surgery. Israel-based Mazor Robotics is one of the few that have been able to follow with its own real, live-production robotic surgery system, and it appears to be just starting its own growth trajectory.
Mazor Robotics' big claim to fame is that patients receiving surgery with its devices can see faster recoveries with post-operative pain and have fewer rates of complications vs. traditional operations. Just like Disney wasn't the first entertainment company out there but leveraged its high quality to grow, Mazor Robotics looks capable of leveraging those strong quality benefits to build its business over time.
Speaking of that growth, in its most recently reported quarterly results, Mazor Robotics provided investors with many reasons to believe that its future looks bright. Those include:
Revenue more than doubling to over $17 million;
Receiving authorization to sell its Mazor X System in Europe; and
Getting interim clinical data to showcase a fivefold reduction in complications and a sevenfold decrease in revision surgeries when its equipment is used vs. freehand lumbar fusion surgeries.
With its revenue expanding and its losses contracting as it scales up its operations, Mazor Robotics looks like it's at the early end of its growth curve. With an in-demand industry like surgery and the clear quality benefits it brings to the table, Mazor Robotics may see growth in the future much like Disney did over the last several decades.
Following Disney's template for success
Danny Vena (Netflix): One of the keys to Disney's success is the treasure trove of intellectual property that the company has accumulated over the last six decades. In addition to its own studio films, Disney has made strategic acquisitions to expand its IP, including animation house Pixar, comic book publisher Marvel, and Lucasfilm -- the studio behind the iconic Star Wars movies.
Netflix, too, has begun building its own library of IP. The company started by producing content for others with the debut of House of Cards in 2013. Many original programs followed, and the company soon decided to own, rather than merely produce, the shows. CFO David Wells revealed in late 2016 that the company's goal was for half its content to be original productions, with the remaining 50% being licensed movies and TV shows.
In an overview of its content accounting released earlier this year, Netflix said:
We believe the benefits of self-producing content include lower costs (no studio middle-man), ownership of intellectual property, which allows us to potentially monetize in different ways, (eg, licensing & merchandising) and greater flexibility (global rights, exclusivity).
Netflix has already made its first foray into merchandising, with products related to its pop culture hit Stranger Things hitting store shelves. It also made the first acquisition in its 20-year history by buying comic book house Millarworld.
With global reach and international profitability, the company is finding new ways to generate revenue from its IP. From content creation to merchandising, Netflix feels a lot like Disney in 1957.
A retailer changing its game plan
Keith Noonan (Shopify): There aren't many surface-level similarities between the business models of Disney and Shopify, but investors looking for growth potential might see some of the House of Mouse's "right business at the right time" magic in the young e-commerce company. It's no secret that online selling is the future of retail, and Shopify is positioned to play a central role in its growth with services that make it easy for small and medium-sized businesses to have a versatile e-commerce presence.
Online retail grew 15.5% in the October-ended quarter but still accounted for just 9.1% of total retail sales, according to the U.S. Department of Commerce. E-commerce has already revolutionized the way people do their shopping, but it's actually still a relatively young phenomenon, and that momentum should help Shopify continue to post big sales gains.
Since going public, the company has grown its customer base from 162,000 to over 500,000 merchants, and it's still just scratching the surface of its addressable market. With the company generating subscription revenue from each seller that uses its platform, as well as a commission fee on each item sold through the platform, there's a long runway for rapid sales and earnings expansion.
The company's core business also puts it in good position to embrace new opportunities in the small and large ends of the enterprise market as they arise. Last year, Shopify launched a financing business that's helping it generate returns on its cash reserves while also growing and strengthening its customer base. It's also partnered with leading social networks like Instagram and sale platforms like Amazon.com and is building out a platform for mixed reality-based shopping experiences.
Shopify's share price has climbed more than 300% since market close on the day of its IPO in April 2015, but with a huge market still to be tapped, the company's roughly $10 billion market cap leaves a lot of room for growth. Like Disney in 1957, Shopify has the opportunity to shape and benefit from a range of far-reaching business trends and generate big returns for shareholders along the way.
Chuck Saletta has no position in any of the stocks mentioned. Danny Vena owns shares of Intuitive Surgical, Netflix, and Shopify. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Intuitive Surgical, Netflix, and Shopify. The Motley Fool recommends Mazor Robotics. The Motley Fool has a disclosure policy.
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