Cathie Wood leads Ark Invest, an investment management firm that rose to prominence in the early days of the pandemic. Although the subsequent years were a bit harsher, Wood bounced back in 2023 -- along with much of the market. Ups and downs aside, Wood's exchange-traded funds (ETFs) are home to some excellent growth stocks that investors can safely hold through thick and thin. Let's look at two examples: Exact Sciences (EXAS +0.00%) and Block (SQ +3.21%).
NASDAQ: EXAS
Key Data Points
1. Exact Sciences
Exact Sciences specializes in developing cancer diagnostic tests. The company's best-known product and biggest cash cow is Cologuard, an at-home colorectal cancer diagnostic kit. Exact Sciences has several other products, including its Oncotype Dx kit that helps predict the probability of recurrence in breast cancer patients and guides physicians in choosing the best treatment options.
Still, Cologuard is Exact Sciences' most important product, and though it has been on the market since 2014, there remains plenty of upside potential. Colorectal cancer is the second leading cause of cancer death in the U.S., even though it is highly treatable when caught early enough. That's a clear sign that not enough eligible people are being screened. Exact Sciences estimates a market of 60 million unscreened people in the U.S. between the ages of 45 and 85.
The company thinks it can reach the 30 million people mark by 2027, up from 10 million in 2022 and 1 million in 2018. Exact Sciences is also developing a second version of Cologuard that will help accomplish at least two goals. Cologuard 2.0's higher specificity (true negatives) and sensitivity (true positives) should help convert some physicians who have, thus far, been on the fence about the test.
The next-gen Cologuard will also be at least 5% cheaper to manufacture, saving Exact Sciences plenty of money. Exact Sciences is also developing newer products, including a multicancer testing kit. Last year's financial results were pretty strong for Exact Sciences. The company's third-quarter revenue of $628.3 million increased by 20% year over year, while its earnings per share broke even, compared to a net loss per share of $0.84 in the year-ago period.
With Cologuard's ongoing momentum and newer products on the horizon, Exact Sciences' financial results and stock market performances should remain strong.
NYSE: SQ
Key Data Points
2. Block
It hasn't been smooth sailing for Block over the past 18 months. The fintech specialist dealt with a short-seller report and seesawing revenue from Bitcoin trading. However, the short-seller report Block was hit with is now mostly a distant memory, while the company's crypto-related revenue rebounded. More importantly, Block's core ecosystems are still performing well. The company offers businesses a range of services -- including payroll, inventory, and point-of-sales systems -- through Square, while it targets consumers with traditional banking services through Cash App.
The peer-to-peer payment app offers a debit card, tax preparation services, direct deposits, and stock and Bitcoin trading. In the third quarter of 2023, Block's gross profit jumped by 21% year over year to $1.90 billion, with both Square and Cash App seeing strong increases in gross profit year over year. Cash App, in particular, looks unstoppable. It ended the period with 55 million monthly transacting active customers -- an increase of 11% year over year -- with Cash App Card and Cash App Pay reaching 22 million and 2 million monthly users, respectively.
Cash App Pay was first introduced in September 2021 and expanded to handle payment outside the company's ecosystem one year later. According to Block, Cash App Pay doubled its number of users from June to September 2023. Even within the company's already existing users, there is still plenty of room left for growth. It can convince more of its transacting customers to use Cash App Pay and Cash App Card, which often happens after people start using the app for other purposes.
The same dynamic operates within Square, where businesses first come seeking to use the company's sleek POS systems but end up signing up for more overtime. Furthermore, Cash App and Square arguably benefit from competitive edges. The former carries high switching costs, while the latter benefits from the network effect. That, coupled with the long runway for growth available in the fintech industry, should allow Block to deliver strong results over the long run.
