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3 High-Growth Stocks That Are Just Getting Started

By Travis Hoium - May 6, 2020 at 7:12AM

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COVID-19 won't stop Axon, Shopify, and Square.

The stock market has been in turmoil for two months now, and investors are searching for companies that still have a lot of upside. But not all businesses will be affected by COVID-19 the same way, and some may have an even brighter future when this current crisis is over. 

Axon Enterprise (AXON -1.69%), Shopify (SHOP -2.82%), and Square (SQ -2.64%) are all high-growth stocks, and there are reasons they will be even better off when the economy returns to normal. 

Blocks in steps with the top block showing an upward sloping line of arrows.

Image source: Getty Images.

Law enforcement doesn't stop

There are a lot of businesses that will be disrupted by COVID-19 in 2020, but law enforcement isn't one of them. Police officers are still on the street and prosecutors are still charging people with crimes, so Axon's business charges on. 

Axon is by far the industry leader in Tasers and body cameras, two products that are becoming essential in law enforcement today. A move to subscription-based hardware and software is also driving higher long-term value and alleviating some of the budget pressure law enforcement agencies feel in buying new products. And that's driving incredible growth

You can see below that revenue and gross profit have grown more than 400% over the past decade and show no sign of stopping. 

AAXN Revenue (TTM) Chart

AAXN Revenue (TTM) data by YCharts. TTM = trailing 12 months.

What I like about Axon's position long term is that it's making law enforcement's job easier. The company has launched a documentation product called Axon Records that will allow agencies to create digital records, and artificial intelligence products like transcripts and facial recognition will make it easier to sift through a growing amount of digital assets. And that'll keep this company growing for years to come. 

Changing how we shop

Over the last decade, (AMZN 0.73%) has proved that customers will shop online in droves. But it's not the most optimal online shopping platform, acting as a physical intermediary between product producers and end customers. Think about the flow of a product going from the manufacturer to an Amazon warehouse and then being shipped to a customer. The more efficient way to operate would be to go straight from manufacturing to the customer, and that's what Shopify enables. 

Shopify allows companies small and large to build an online store and easily track inventory and ship products. Whether you're starting a small business from home or are a large manufacturer, these are valuable services. And unlike Amazon (see Amazon's Essentials business), Shopify doesn't appear to be becoming a competitor to the businesses it deals with. 

SHOP Revenue (TTM) Chart

SHOP Revenue (TTM) data by YCharts.

It's hard to argue that Shopify is a value stock, but it's well positioned in a growth industry and has a lot of options for long-term growth. That's why I think this stock is just getting started, and eventually the bottom-line results will follow. 

Enabling small businesses

Another company taking the approach of helping small businesses operate is Square. The company's payment system has become a staple for salons, food trucks, and even small retailers. 

What Square has done, which is different from Shopify, is build out an ecosystem to run an entire business. Payroll, marketing, inventory control, and even capital have become part of the company's ecosystem. And it's hard to argue with the growth Square has demonstrated so far. 

SQ Revenue (TTM) Chart

SQ Revenue (TTM) data by YCharts.

There will no doubt be a lot of businesses that struggle in 2020, which will hurt Square short term, but the company is built to be the backbone of new businesses that are forming this year and beyond. And with a growing ecosystem, it becomes a crucial tool for their operations. It's that full-service solution that makes me think Square has a lot of growth ahead. 

Built for the long term

All three of these companies are built to enable others to do their jobs more easily. That's driven growth historically and I think that will continue. Investors looking for growth stocks that are designed to last should consider Axon, Shopify, and Square as long-term market beaters. 

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Stocks Mentioned

Axon Enterprise Stock Quote
Axon Enterprise
$94.03 (-1.69%) $-1.62
Shopify Inc. Stock Quote
Shopify Inc.
$33.04 (-2.82%) $0.96
Block, Inc. Stock Quote
Block, Inc.
$64.97 (-2.64%) $-1.76, Inc. Stock Quote, Inc.
$114.33 (0.73%) $0.83

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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