There are a number of famous figures in the world of investing, and sometimes, looking to those people for inspiration on what stocks to buy can be a great idea. One of these famous names is Cathie Wood, CEO of the management firm Ark Invest. Wood and her team have built and actively manage several ETFs that contain many quality stocks.
Let's consider two of those stocks: Guardant Health (GH 1.11%) and Pinterest (PINS 4.04%). Here is why these two companies could be excellent options for long-term investors.
1. Guardant Health
Catching cancer as early as possible is one of the keys to treating it. Guardant Health is doing its part with its portfolio of liquid biopsies, or tests that can detect cancer cells non-invasively from blood samples. Guardant offers a range of products, including tests for the early detection of colorectal cancer, and others to steer physicians in choosing the best therapy options for their patients and to monitor treated cancer patients with potential recurrence.
Although cancer testing is competitive, Guardant Health has been fairly successful thanks to its ability to innovate and develop powerful diagnostic tests. The company's financial results have been promising, too, especially on the top line. Guardant Health's revenue in the second quarter was $137.2 million, almost 26% higher than the year-ago period.
And for the second quarter in a row, the company increased its full-year top-line guidance. Guardant now expects revenue between $545 million and $550 million for its fiscal 2023, up from a previous projection of $535 million to $545 million. At the midpoint, Guardant Health's new guidance would represent year-over-year growth of almost 22%.
However, the company remains unprofitable. In the second quarter, its net loss per share of $0.67 was much better than the loss per share of $2.25 reported in the year-ago period. The persistent red ink on the bottom line partly explains why the stock has lagged the market over the past year although the company has performed better since 2023 kicked off.
Here's why Guardant Health can deliver excellent results for investors who hold its shares for the next decade. There is still massive room to grow in the cancer testing space. Guardant estimates a total addressable market of over $100 billion across its cancer diagnostic products. It isn't the only company looking to cash in on this lucrative opportunity; it certainly won't grab all of it. But capturing a relatively modest 5% share of this market would allow it to deliver steadily growing revenue.
And while the company's gross margin has decreased in the past year, it is still competitive at above 60%.
GH Gross Profit Margin data by YCharts
Moving closer to profitability as it makes headway in the giant cancer-testing market and decreasing its marketing expenses should allow Guardant Health to deliver excellent returns through the next decade.
2. Pinterest
Social media specialist Pinterest has had a tumultuous past three years in the stock market. The company's shares soared in the early days of the pandemic when people were stuck at home, but life has gotten back to a semblance of normalcy since then, hurting its results and stock performance. However, there is good news. Pinterest is addressing user growth, one of the issues that has worried investors.
In the second quarter, Pinterest's monthly active users (MAUs) increased by 8% year over year to 465 million. Still, the company's revenue growth has slowed considerably over the past couple of years. Its second-quarter top line of $708 million was only 6% higher than the second quarter of the previous fiscal year.
PINS Revenue (Quarterly YoY Growth) data by YCharts
Pinterest has been a victim of the decrease in ad spending, but that won't last forever. Once things recover, its revenue growth rates should, too. It's also worth noting that comparisons to the earlier days of the pandemic are a bit unfair. Those days were highly unusual for Pinterest and other social media companies. So, investors shouldn't make too much of that. Pinterest has another major growth avenue besides the rebound we will inevitably see in ad spending.
The company is looking to extend its activities into e-commerce by making every Pin (saved images on its website) shoppable. That won't happen overnight, but the potential here is huge. Pinterest's shift to e-commerce seems natural, considering people already use the website partly to look for ideas that can inspire purchases. And the company's visual flavor can entice users to make transactions directly on the website, especially considering the convenience of it.
Pinterest is making progress. During the company's second-quarter earnings conference call, CEO Bill Ready said: "We increased our focus on making Pinterest more shoppable by integrating shopping into the core experiences of our platform. We're now seeing strong growth in engagement with shopping-related content on our core surfaces and for the past four quarters, shopping ads revenue has grown multiples of our total revenue growth."
Though e-commerce already seems ubiquitous, the market still has room to grow. Over the next decade, Pinterest could continue growing its MAUs while its revenue continues moving in the right direction thanks to its advertising business. And Pinterest's ventures in e-commerce should provide another boost to the company's financial results and stock market performance. That's why it's a stock worth owning through the next decade.
