The stock market has shown signs of life over the past three months on the back of favorable inflation data, leading to an 11% jump in the S&P 500 index during this period, and this has rubbed off positively on shares of Shopify (SHOP +2.30%) and ASML Holding (ASML +0.18%), which have easily outpaced the broader market's gains.
While Shopify stock has gained 49% in the past three months, shares of ASML are up a whopping 74%. It remains to be seen if these stocks will be able to sustain their momentum in the near term amid the Federal Reserve's hawkish stance to control inflation.
But investors should focus on the big picture, which could send these breakout growth stocks soaring over the next decade. Let's look at the reasons why it would be a good idea to buy and hold onto these two stocks for a long time.
1. Shopify
The global e-commerce market is expected to keep growing at a terrific pace over the next decade, driven by the growing penetration of online shopping across the globe.
In Asia, for instance, e-commerce penetration is expected to hit 29% by 2026, while the online channel is expected to account for 31% of total retail sales in North America by then. Those numbers would be an improvement over 2022, when e-commerce accounted for 24% and 25% of total retail sales in North America and Asia, respectively.
NASDAQ: SHOP
Key Data Points
More importantly, the 2026 estimations suggest that there should still be a lot of room available for e-commerce growth over the next decade. Not surprisingly, the global e-commerce market is expected to clock a compound annual growth rate of 15% through 2032, generating $22.8 trillion in annual revenue.
This sets the stage for Shopify to clock robust growth over the next decade, as the company's offerings play a key role in helping merchants bring and operate their businesses online.
Shopify is already benefiting from growing e-commerce adoption. The company's 2022 revenue is estimated to have increased 20% to $5.5 billion, and similar performance is expected in 2023, with revenue expected to increase to $6.6 billion. What's more, Shopify's top-line growth is expected to accelerate in 2024.
SHOP Revenue Estimates for Next Fiscal Year data by YCharts
It isn't surprising to see that Shopify's growth is expected to pick up. The company provides tools to merchants to build their online stores, sell their products across multiple e-commerce channels, build their businesses with its marketing solutions, fulfill orders through its fulfillment network, and provide payments solutions (including point of sales). And it even funds merchants with Shopify Capital.
As e-commerce proliferation increases across the globe, the demand for Shopify's e-commerce software and other solutions should increase. This explains why Shopify estimates that it is sitting on a huge total addressable market that's worth $160 billion. This also indicates that the company is at the beginning of a massive growth curve considering its trailing-12-month revenue of $5.2 billion.
As such, Shopify seems built for impressive growth over the next decade. With the stock trading at 9.4 times sales right now, investors are getting a good deal, as the multiple is lower than the five-year price-to-sales ratio of 30. Of course, the stock is relatively expensive when compared to the S&P 500's sales multiple of 2.4, but investors should note that the valuation seems justified given its impressive growth, and sunny long-term prospects could send this e-commerce stock higher.
2. ASML Holding
Dutch semiconductor giant ASML has been in fine form on the stock market over the past three months, which is not surprising as the company recently issued terrific long-term guidance that points toward sustained growth through the end of the decade.
The company, whose equipment is critical in the manufacturing of semiconductors, expects annual revenue to land between 44 billion euros and 60 billion euros in 2030. The lower end of that guidance indicates that ASML's revenue should at least double by the end of the decade compared to its 2022 projected revenue of 21 billion euros. The top end of that guidance indicates that ASML's revenue could increase at a compound annual growth rate of 14% through 2030.
NASDAQ: ASML
Key Data Points
Global semiconductor demand is expected to remain healthy in the long run despite a potential dip in 2023. Gartner estimates that worldwide semiconductor revenue could fall 3.6% this year to $596 billion. But by 2030, global semiconductor revenue is expected to hit $1 trillion. ASML will be one of the key enablers of this growth, as the company's lithography machines are used for fabricating chips.
It is worth noting that ASML is the dominant player in its industry, as it reportedly controls 80% of the market for lithography machines. What's more, ASML holds a monopolistic position in the market for EUV (extreme ultraviolet) lithography machines, which are used for making advanced chips based on 7-nanometer (nm), 5nm, and 3nm nodes.
These advanced manufacturing nodes increase the density of chips by packing in more transistors in a smaller area. As a result, chipmakers can generate more computing power and reduce the size of their chips at the same time. Not surprisingly, semiconductor foundries are witnessing robust demand for chips made on smaller processing nodes, which is why the likes of Intel and Taiwan Semiconductor Manufacturing have already placed orders for ASML's advanced chipmaking equipment.
In all, it is not surprising to see that ASML's earnings are expected to grow at almost 30% annually for the next five years. So this semiconductor stock should be able to sustain its impressive momentum for a longer period as well given the secular growth opportunity it is sitting on, which is why investors may want to buy ASML before it flies higher.
