Building a better proverbial mousetrap isn't always a necessary condition for the success of a business, but doing so can help. Those corporations that break new ground often end up being handsomely rewarded, as are those investors bold enough to hold shares of these companies through thick and thin. So investors looking for stocks that can deliver above-average returns through the next 10 years (which probably describes most investors) might want to consider companies that are innovators in their respective fields.
Two great examples are CRISPR Therapeutics (CRSP 0.34%) and Block (SQ 2.32%). Let's find out why these stocks stand a good chance of turning $1,000 into $3,500 -- amounting to a compound annual growth rate (CAGR) of 13.3% -- in the next decade.
1. CRISPR Therapeutics
Gene editing refers to a set of revolutionary techniques that allow scientists to modify an organism's DNA. The field originated decades ago, but biotechs specializing in gene editing to target rare genetic diseases have made substantial progress in the past few years. CRISPR Therapeutics is one of them, and the company recently became a commercial-stage biotech.
In mid-November, CRISPR earned approval for Casgevy, a one-time curative treatment for sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TDT) in the U.K. And on Dec. 8, Casgevy earned the green light in the U.S. for SCD. Let's count the ways in which this approval was a big deal.
First, effective treatments -- much less cures -- for SCD and TDT have been challenging to develop. CRISPR Therapeutics created exa-cel and, with the help of Vertex Pharmaceuticals, got the therapy through multiple clinical and regulatory hoops. It's an impressive achievement for the smaller biotech. Second, there have been gene-editing therapies approved before, but none that use the CRISPR technique In fact, this particular method earned its creators a Nobel Prize.
Perhaps that makes it an unofficial gold standard among gene-editing technologies, and Casgevy, which uses this method, is now on the market. What does all of this mean for investors? CRISPR Therapeutics is a highly innovative biotech with a pipeline full of promising CRISPR-based programs. The company will now generate the funds to push more clinical programs through its pipeline. After all, Casgevy could be looking at a market opportunity of tens of billions.
It will be priced at $2.2 million per treatment course in the U.S. Let's assume that's how much Vertex Pharmaceuticals and CRISPR Therapeutics will also ask patients and insurers to pay in Europe. Given the 32,000 patients they will initially target in these regions, that amounts to $70.4 billion in potential.
CRISPR Therapeutics could make substantial headway into this patient population in the next decade. Meanwhile, there should be plenty of clinical and regulatory wins for the innovative biotech, which will help catapult its stock price, especially as the gene-editing therapy space is projected to grow rapidly. CRISPR Therapeutics could be well on its way to registering that 13.3% CAGR needed to turn $1,000 into $3,500 in the next 10 years.
2. Block
Block, initially known as Square, became a hit with businesses years ago thanks to its sleek, innovative hardware devices that could connect to even a smartphone and turn it into a reliable, portable point-of-sales system. The company has graduated from that and now offers substantially more services to businesses, from payroll to inventory, making its Square ecosystem very attractive. Block also has a consumer-facing unit through its peer-to-peer payment app, Cash App.
It offers direct deposit, tax preparation, a debit card, stock and Bitcoin trading, and more. Both ecosystems continue to perform well. In the third quarter, Block's revenue of $5.62 billion increased by 24% year over year. The company's total gross profit was $1.90 billion, up 21% compared to the year-ago period. Square's gross profit was up 15% year over year, while Cash App's grew 27%. Block still has plenty of room to grow.
One thing to keep in mind about the company is its economic moat. Cash App arguably has a network effect, with people looking to send or receive money from friends or family members getting increasingly likely to get the app as it grows in popularity. Also, once they join, it's simple to enjoy the app's other features. Furthermore, Block's Square ecosystem arguably has high switching costs since the businesses it serves depend on it for their day-to-day operations.
Beyond Square and Cash App, Block owns several other offerings, including TBD, directed at developers looking to create decentralized financial services, a music streaming platform called Tidal, and Spiral, which focuses on developing Bitcoin-related applications. Still, Block's fintech ambitions remain the most promising. The industry has been on a tear, something that will continue moving forward.
Block is well-positioned to profit from this fast-growing opportunity while delivering above-average returns to its shareholders in the next decade.
