Stocks that can triple in six years aren't easy to find. Doing so requires a compound annual growth rate of 20.1%, well above the broader market's historical performance. However, it isn't impossible.
Let's consider two stocks that may have what it takes to pull it off: mid-cap biotech Axsome Therapeutics (AXSM -0.80%) and e-commerce specialist Shopify (SHOP -0.54%). There are no certainties in life (or equity markets), but both corporations have important qualities that could allow them to deliver the required CAGR to triple by the end of 2030. Let's find out more.
NASDAQ: AXSM
Key Data Points
1. Axsome Therapeutics
Axsome Therapeutics has delivered above-average returns in the past six years. Though that doesn't guarantee it will maintain that momentum through 2030, it's instructive to review why it has been able to perform so well. The biotech was a clinical-stage company that delivered meaningful clinical and regulatory progress, leading to its launch of Auvelity, a medicine that treats depression, in 2022.
However, Axsome's innovative days aren't behind it, which may allow the company to continue delivering excellent returns moving forward. Consider, for instance, AXS-12, a potential treatment for cataplexy (sudden muscular weakness) in narcolepsy patients. AXS-12 is currently undergoing a phase 3 study. It has earned the orphan drug designation from the U.S. Food and Drug Administration (FDA), a program designed to help along the development of new and promising treatments for rare diseases.
Axsome is also testing Auvelity in a phase 3 study as a potential treatment for Alzheimer's disease (AD) agitation. It has earned the FDA's breakthrough therapy designation in this field, which exists to speed up the development of medicines for serious diseases with unmet needs, provided the medicine has shown promising clinical evidence of efficacy. Axsome Therapeutics has several more programs in late-stage studies.
Others have already successfully proved effective and should earn approval relatively soon. True, financial results aren't there yet. Last year, Axsome generated revenue of $270.6 million, although that was a 441% year-over-year increase. The biotech remains unprofitable, with a net loss per share of $5.27 last year, worse than the $4.60 reported in 2022. That's largely because of marketing costs and the fact that the company initiated more late-stage studies.
However, with a promising and deep pipeline and a market capitalization of just $3.6 billion, Axsome Therapeutics could soar by the end of the decade.
NASDAQ: SHOP
Key Data Points
2. Shopify
Shopify, too, has been a market-beater despite significant pullbacks at various times. The stock certainly has its detractors. Some complain that it is too expensive, and others point to the lack of consistent profits. These are all reasonable complaints, but in my view, Shopify will continue performing well.
The company continues to strengthen its position in helping merchants build online storefronts. Shopify's goal has been to give its customers all they need to succeed. That's why it has an app store with thousands of options that help merchants customize their online businesses. It allows companies to integrate payments through brick-and-mortar and online channels, and it facilitates the selling and marketing of products through various social media platforms where customers spend a lot of time, and much more.
No wonder that Shopify's revenue has generally grown at a good pace. The company should also make meaningful progress on the bottom line, considering its decision to sell its expensive and low-margin logistics business.
SHOP Revenue (Quarterly) data by YCharts
Here are two things that should allow Shopify to continue growing. First, the e-commerce industry is far from having peaked. While estimates vary, analysts generally agree that it will be on an upward path through 2030 and likely well beyond that. That's an important tailwind that will drive Shopify's growth higher.
Second, the company benefits from high switching costs since abandoning an online storefront, which a merchant has spent a lot of time building, isn't something most will want to do. Migrating stores from one provider to another is possible, but that's the kind of trouble no one wants to go through unless necessary. Considering that Shopify's goal is to accommodate its merchants as much as possible, most likely they won't decide to jump ship.
In short, Shopify has what it takes to deliver a 20% CAGR through 2030, making it an excellent buy-and-hold stock.
