Netflix (NASDAQ:NFLX) filed for its initial public offering 16 years ago. It has gone on to become one of the stock market's most dramatic success stories, soaring from a valuation of less than $500 million in 2002 to over $140 billion today.
It's impossible to know which companies might have a similarly amazing run in them in the coming decades, but three Motley Fool investors see attractive parallels between Netflix in its early days and iQiyi (NASDAQ:IQ), iRobot (NASDAQ:IRBT), and Crispr Therapeutics (NASDAQ:CRSP) right now.
What China wants to show you
Dan Caplinger (iQiyi): It wasn't clear back in 2002 what Netflix would eventually evolve into, but the company did have its fingers on the pulse of what consumers wanted from entertainment content: a wide range of available entertainment in an easily deliverable format. At the time, that meant DVDs, but Netflix didn't hesitate to evolve when streaming technology made it a lot more convenient for people to watch the movies and television shows they wanted when they wanted to watch them. Netflix has made big moves to expand internationally, but the huge Chinese market remains a big challenge for foreign companies, and for now, Netflix has focused most of its attention elsewhere.
Now, iQiyi has emerged within China, spun off from internet giant Baidu and offering streaming digital video to Chinese consumers. The business model iQiyi is following isn't as innovative as Netflix's was back in the day, but it's doing a good job of leveraging three different sources of revenue, not only collecting membership fees but also bringing in sales from online advertising and content distribution. With a smart collaborative partnership with e-commerce company JD.com, iQiyi hopes to bring in an even larger number of premium customers, boosting membership revenue and expanding its presence within the digital video space. iQiyi faces more competition than Netflix did in 2002, but the huge Chinese market has enough room for multiple success stories, and iQiyi has gotten off to a good start.
Robots don't get tired
Demitri Kalogeropoulos (iRobot): Robotic cleaning devices have been around for years, but they're just now starting to see mainstream acceptance. And, as the leading producer in the space, with roughly 60% of the global market share for premium vacuums, iRobot has a good shot at earning impressive sales and profit growth once this niche matures.
Its most recent results showed off the strength of its brand and its technical lead in the industry. Sales spiked 29% to beat management's forecast thanks to healthy sales of the Roomba vacuum and an encouraging early reception to its new mopping device, called Braava.
As was the case in Netflix's early streaming-video days, there's a wide range of competitors working to establish themselves in the robotic cleaning industry today. And iRobot's long-term profitability will depend on its success at holding off these competitors as it seeks to build scale over the next few years. That's why it makes sense for management to prioritize sales growth over profits right now. Yet if it can keep pushing the industry forward -- like it did last year with innovations such as advanced mapping functionality -- iRobot might be rewarded with a prime position in a much larger industry a decade from now.
A powerful new technology
George Budwell (Crispr Therapeutics AG): Finding stocks that can produce gains like Netflix is no small feat. However, the gene-editing company Crispr Therapeutics may have what it takes to walk in Netflix's sizable footsteps.
Crispr is a leader in the latest iteration (and possibly the most powerful form) of gene editing known as Clustered Regularly Interspaced Short Palindromic Repeats, or CRISPR. The quick and dirty version of the story is that this fairly straightforward gene-editing platform may unlock functional cures for perhaps thousands of diseases involving mutations in a single gene. Equally as exciting, this unique approach to gene editing might even be a useful tool in agriculture.
Where does Crispr stand now? Per the company's first-quarter earnings release, Crispr and its partner Vertex Pharmaceuticals are on track to initiate a combined phase 1/2 trial to assess the safety and efficacy of autologous gene-edited hematopoietic stem cell therapy CTX001 in patients with transfusion-dependent beta thalassemia sometime in the second half of 2018. This trial is set to be the first company-sponsored CRISPR-based product candidate to be assessed in human subjects in the United States.
While it's still early days and there are some concerns that the first generation of CRISPR systems won't pan out in humans, Crispr does have the potential to generate absolutely astonishing returns on capital if CTX001 hits the mark in the clinic. CRISPR, after all, could end up becoming the gold standard in the new era of gene editing that's only now starting to become an integral part of the biopharmaceutical landscape.
Dan Caplinger has no position in any of the stocks mentioned. Demitrios Kalogeropoulos owns shares of Netflix. George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends BIDU, iRobot, JD, and Netflix. The Motley Fool owns shares of CRISPR Therapeutics. The Motley Fool recommends iQiyi and VRTX. The Motley Fool has a disclosure policy.