It is always difficult to predict how the stock market will behave in the near term. And given the current economic uncertainty caused by the ongoing COVID-19 outbreak, it is even more of a challenge.
However, we can be reasonably confident that 10 years from now, the stock market will have risen from its current levels. Investors who buy shares of companies with strong prospects, and who have the patience to hold on to these shares through thick and thin, will be winners in the long run. With that in mind, here are three companies that are poised to deliver above-average returns over the next decade: Teladoc (NYSE:TDOC), Shopify (NYSE:SHOP), and Etsy (NASDAQ:ETSY).
Telehealth services have come into sharp focus amid the COVID-19 pandemic, and few companies have been able to benefit from this trend nearly as much as Teladoc. The healthcare company allows patients to consult physicians from the comfort of their homes at any time. Providing consultations in a timely manner isn't a simple task, and Teladoc can only do it thanks to the network of medical professionals it has been able to build. The company has managed to amass more than 50,000 clinicians worldwide, and it offers its services in more than 40 languages.
Further, recent events have helped improve the company's profile. One of the ways Teladoc generates revenue is by charging per-visit fees to those whose telehealth services aren't covered by insurance. The company recently said that such visits have increased significantly because of the COVID-19 outbreak. Teladoc could end up turning many of these clients into regular customers, especially given the convenience of the services it offers.
In the long run, Teladoc is ideally positioned to profit from the growth in demand for telehealth services. "We believe that favorable macro trends, in combination with the expansion of our capabilities, present significant opportunities for virtual healthcare to address the most pressing, universal healthcare challenges through trusted solutions, such as ours, that match consumer demand and physician supply at the time of need," the company wrote in its most recent 10-K filing.
Teladoc's momentum will likely remain strong for many years to come as the company expands its reach across the globe. The company's stock is also poised to increase substantially in the future, and investors who initiate a position in Teladoc today are unlikely to regret it.
Shopify has become the go-to platform for businesses looking to reach customers online by way of creating a customized e-commerce store. The company has attracted more than a million merchants onto its platform over the past few years, and Shopify's revenue -- and its stock price -- have grown almost exponentially as a result.
Shopify's first-quarter revenue was $470 million, 47% higher than the prior year. Subscription solutions revenue was 186.7 million, a 34% year-over-year increase, while merchant solutions revenue grew by 57% to $282.4 million. Shopify will likely continue to grow in the future as it keeps attracting new merchants and expanding the services it offers to those merchants.
One service offering Shopify has been focusing on of late is its fulfillment network. In September, Shopify announced it would acquire 6 River Systems -- a privately held provider of warehouse fulfillment solutions -- in a cash-and-stock transaction valued at about $450 million. This transaction was completed in October.
Shopify's fulfillment network is already successful; to quote CFO Amy Shapero, "Demand continued to ramp in Q1 as Shopify Fulfillment Network had its highest number of merchants signings in a quarter since inception. And we fulfilled more volume in the first quarter of 2020 then the fourth quarter of 2019."
The company plans to continue investing heavily in this initiative, and it is just one of the many ways Shopify can serve its many clients and attract new ones, thus ensuring that its financial results -- and its stock price -- continue to soar. Despite its market-shattering performance in recent years, Shopify might just be getting started.
Etsy's business model is centered around the exchange of unique, specialized, and often handmade goods. And, much like Shopify, Etsy is a leader in its niche of the broad e-commerce industry. The company continues to make headway within this niche, too.
During the first quarter, Etsy's active seller count increased by 26.4% to 2,814, while the number of active buyers on the platform grew by 16.4% to 47,748. Etsy's gross merchandise sales (GMS) -- the value of items sold on Etsy's marketplace -- increased by 32.2% year over year to about $1.3 billion for the first quarter. Meanwhile, the company's revenue of $228 million was up by 34.7%, while its non-GAAP net income increased by 10.4% to about $55 million.
Of course, Etsy is looking for ways to continue growing its revenue and earnings. Let's briefly discuss two of the methods the company is currently employing. First, Etsy has been hard at work tweaking its search algorithms to direct more traffic onto its platform. Second, the company has been making a push to offer free shipping for as many items as possible. This push has had great results, as Etsy CEO Josh Silverman said:
Encouragingly, we've seen that the purchases per visit have increased as a result of the free shipping initiative. In addition, our recent buyer surveys show improved sentiment around shipping and buyers report higher future intent around visiting, shopping and adding more to their cart...For sellers to offer the free shipping guarantee, our data shows that on average their GMS is disproportionately up from the prior year and they are seeing an increase in their up sell rate. In other words, the number of items per transaction has improved for these sellers.
Thanks to these (and other) initiatives, Etsy will likely capture an even larger share of the market for the sale of specialty goods, which remains severely untapped. Etsy is poised to grow substantially over the coming decade as it continues to make headway within this market.