Cryptocurrencies are all the rage these days, and some have performed ridiculously well in the past year. For instance, Shiba Inu has delivered jaw-dropping gains of roughly 365,140% in the past 12 months. That performance is formidable by any standard, but I remain skeptical of the future of cryptocurrencies in general, including Shiba Inu.
Will it gain widespread acceptance? How will regulation impact it in the future? These questions are challenging to answer. While it may be worth adding some exposure to cryptos in a well-diversified portfolio, long-term investors will arguably fare better by focusing on stocks with excellent growth prospects. Let's consider two excellent companies whose shares are worth buying today: Veeva Systems (VEEV -0.15%) and Lemonade (LMND 3.16%).
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1. Veeva Systems
Veeva Systems provides cloud-based solutions to data storage and management and regulatory compliance problems for companies in the life sciences industry. What makes Veeva Systems' business so great is that its clients' day-to-day operations are highly dependent on its services. Storing data in a way that makes it easily and quickly accessible to decision-makers is critical for many corporations.
Add several layers of regulations to adhere to at every phase of bringing products to market, and the stakes become that much higher. That's what life science companies have to deal with, and Veeva Systems makes these tasks easier and more efficient. Veeva Systems' clients risk severe business disruption if they choose to switch to one of the company's competitors.
That grants Veeva Systems' business a solid competitive edge in the form of high switching costs. The company routinely registers retention rates between 120% and 130% for its subscription services -- its largest segment by revenue. In other words, it tends to add clients instead of losing them.
Veeva Systems plans to record $3 billion in revenue by 2025. In the nine months ending Oct. 31, 2021, the company's revenue came in at $1.4 billion, 27.8% higher than the year-ago period. Its net income came in at $330.3 million, a 19.2% year-over-year increase. For its fiscal year 2022, which ended on Jan. 31, the company said it expects revenue around $1.8 billion.
Veeva Systems' goal of $3 billion in revenue by 2025 seems achievable. But more important is the company's long-term opportunity to address various challenges and gain new customers in the massive $2.2 trillion (and growing) life sciences industry. That's not to mention Veeva Systems' ventures into other highly regulated sectors, including the chemicals industry.
The company sees a total addressable market ahead of more than $13 billion ahead. Veeva Systems will continue to make solid headway into this market. The healthcare company may not capture all of it, but thanks to its solid competitive advantage and the usefulness of its services, it is well-positioned to grab at least a decent share of this pie, thereby helping it grow its revenue and earnings along with its share price.
2. Lemonade
Lemonade is an insurance company, but it isn't like most others. It uses artificial intelligence (AI) to make signing up for an insurance policy and filing claims significantly faster. For instance, according to the company, its AI bot, Jim, pays for claims in as little as three seconds. This process can sometimes take days or weeks with competing insurance companies.
Lemonade's AI-centered process is particularly appealing to younger generations, and that's a feature of its business, not a bug. Millennials and Gen Z are its primary target market. People tend to spend more on insurance products as they age and as their income and wealth increase.
Its ability to appeal to a younger audience could help it retain these customers for many years, which will benefit the company as its clients gradually opt into even more of its services.
Image source: Getty Images.
Lemonade has been highly successful in attracting customers and growing its revenue. The company recorded roughly 1.4 million customers in the third quarter, a 45% year-over-year increase. The company's third-quarter revenue of $35.7 million doubled compared to the year-ago period. However, Lemonade isn't profitable yet.
In the third quarter, its net loss came in at $66.4 million, compared to the net loss of $30.9 million it reported during the year-ago period. The red ink on the bottom line probably played a role in its recent catastrophic performance on the market. Lemonade's shares have dropped by 82.3% in the past 12 months.
But there's hope for the company. After home and pet insurance, it is expanding into other markets, including auto insurance. Last year, it announced it would acquire car insurance company Metromile in an all-stock transaction valued at $500 million. The deal is expected to close during the second quarter of this year.
The auto insurance market is worth $300 billion in the U.S. -- and it is 70 times larger than the renters' insurance market and 80 times larger than the pet insurance market.
Lemonade estimated that its current clients spend about $1 billion annually on car insurance. That gives Lemonade a vast market to make headway into, even if it grabs just a portion of it. And as more young people start buying insurance policies, Lemonade's addressable market will only grow. I fully expect Lemonade's revenue to outpace its expenses and for the company to eventually turn a profit.
That's why despite recent struggles, Lemonade is an excellent long-term bet.
