Despite the recent coronavirus-fueled market downturn -- and the economic consequences that will ensue -- some companies are poised to come out of the crisis stronger than ever, and their stock prices will continue to grow long after the crisis ends. That means now may still be a good time to consider adding stocks to your portfolio. With that in mind, here are two growth stocks that I think are worth buying right now: Livongo Health (LVGO) and Shopify (SHOP 3.42%).
1. Livongo Health
Livongo Health provides people with diabetes (and other chronic health conditions, such as hypertension) with a suite of products and services to help them stay on top of their illnesses and live overall healthier and better lives. The company offers personal coaching and assistance services, as well as tools such as glucose meters. Livongo Health was part of a crowded IPO class of 2019, entering the market on July 25. And although the company's first few months as a publicly traded company were not pretty, the stock price has recovered since.
In fact, over the past six months, the company's stock is up by 145.5%. This performance has been backed by strong revenue growth. During the second, third, and fourth quarter of its fiscal year 2019, Livongo Health's revenue increased by 156%, 148%, and 137% year over year, respectively. Livongo's latest earnings report -- released May 6 -- was also impressive. The company recorded first-quarter 2020 revenue of $68.8 million, up 115% year over year.
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Also, there are now 328,000 people enrolled in the company's diabetes services, representing an increase of 100% year-over-year. The company revised its guidance upward for fiscal 2020, from between $270 million and $280 million to between $290 million and $303 million.
Livongo Health is only beginning to tap into the opportunities available within its diabetes and hypertension markets, which are worth a combined $46.7 billion according to the company's estimates. The healthcare company will continue to outperform the market as it continues to make headway within its niche.
2. Shopify
Shopify has provided market-shattering returns in recent years, and the ongoing public health crisis caused by the coronavirus pandemic has done little to slow down the e-commerce company. Year to date, Shopify's stock is up by 80%. The company also continues to deliver strong financial results, with revenue of $470 million in the first quarter, 47% higher than the year-ago period. Of particular note was Shopify's subscription solutions revenue (monthly fees), which came in at $187.6 million, up 34% year over year. Merchant solutions revenue (largely from payment processing) grew by 57% to $282.4 million.
It is worth noting that although most of Shopify's clients are small and medium-sized businesses, which in general have been hit hard by the pandemic, increased online shopping activity has actually helped Shopify itself. Most importantly, the company's long-term prospects are still attractive.
For one thing, the company has already built a name for itself as the ultimate one-stop shop for small businesses looking to build a customized e-commerce platform. That's why Shopify continues to attract entrepreneurs even in these challenging times, noting in its most recent quarterly update that "new stores created on the Shopify platform grew 62% between March 13, 2020 and April 24, 2020 compared to the prior six weeks, driven by the shift of commerce to online as well as by the extension of the free trial period on standard plans from 14 days to 90 days." The company went on to say that there is no guarantee that these stores will "sustainably generate sales," but their existence is a testament to Shopify's ability to attract merchants.
Shopify's services also benefit from high switching costs. Merchants are likely to stick with Shopify once they have spent the time and resources to build an e-commerce platform using the company's services.
Shopify is well-positioned in the e-commerce industry, which is still ripe for growth. This company will continue to deliver market-beating returns for many years to come.
