Popular themes on Wall Street today include artificial intelligence (AI), the market for weight management medicines, and the potential impact of tariffs on broader equities and the economy. In 10 years, there will probably be a different set of trending topics on The Street, but those changes won't stop the market from delivering competitive returns over the next decade.
Those who want to cash in on that can purchase exchange-traded funds (ETFs) that track the performance of some major index, or invest in individual companies that are likely to perform better than the market in the next 10 years. For those opting for the second method, two great picks are Shopify (SHOP -0.53%) and Vertex Pharmaceuticals (VRTX 1.45%).
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1. Shopify
It's been 10 years since Shopify went public. In that time, the company has crushed the market, although it's been a bit of a volatile ride. While a lot has changed since 2015, Shopify's basic investment thesis remains the same: It is a leader in its niche of the fast-growing e-commerce market and boasts a strong moat.
Let's unpack that a little more. Shopify helps merchants build and customize online storefronts.
It offers them practically everything they need to run their stores, including inventory management, payment processing, the ability to cross-sell across social media websites, and much more. At the end of 2024, Shopify commanded more than 12% of the U.S. e-commerce market by gross merchandise volume.
Shopify's competitive edge comes from at least two sources: switching costs and network effects. Since merchants spend a significant amount of time building online stores on the company's platform and doing the necessary marketing work to attract clients, they won't want to switch and risk disrupting their day-to-day operations. That means Shopify is likely to keep most of its clients.
Elsewhere, the company has an app store with thousands of options that help merchants customize their websites. The more developers seek out the company's app store for their creations, the more attractive it is to merchants.
Turning to Shopify's long-term opportunity, the e-commerce market is on a growth path since it grants merchants a far larger pool of potential consumers, and vice versa. But more than 80% of retail transactions still happen offline, even in the U.S.
All these factors paint a bright picture for Shopify's future. Some might point out that the company still isn't profitable or that its forward price-to-sales multiple of almost 13 is more than six times higher than where the undervalued range starts, usually at 2 and under. However, Shopify has made significant changes to its business in recent years, which have helped boost its margins, including eliminating its expensive logistics business. The company should become consistently profitable within a few years.
Lastly, the stock is worth a premium considering its prospects. Although it may be volatile in the short term due to its rich valuation metrics, Shopify should deliver superior returns over the next decade. That's why the stock is a buy today.
2. Vertex Pharmaceuticals
Over the past year, Vertex Pharmaceuticals, a leading biotech, dealt with clinical setbacks and illegal copies of some of its medicines in Russia, which led to lower sales than it expected. Further, one of the company's newer approvals, Casgevy, still isn't generating much in revenue, despite first earning the green light in late 2023.
Casgevy is a gene-editing treatment for a pair of rare blood diseases. Gene-editing therapies are notoriously complex to administer, which is why it's taking a long time to ramp up revenue for this product.
Even so, Vertex Pharmaceuticals looks attractive. It is still the only game in town for patients with cystic fibrosis (CF), a rare lung disease. Vertex is the only biotech that has cracked the code so far, and it manufactures medicines that target the underlying causes of this condition, rather than just its symptoms.
Vertex's success in the CF field should continue to drive top- and bottom-line growth. Elsewhere, the company can count on other newer approvals.
In January, the U.S. Food and Drug Administration gave the nod to Journavx, the first oral non-opioid pain inhibitor. Even without potential label expansions, this medicine can achieve some decent success, considering there is a high unmet need for new, non-opioid pain treatments. According to some estimates, it could generate $2.9 billion in revenue by 2030.
The company should also continue expanding its lineup. It plans on sending applications for Zimislecel, a potential treatment for type 1 diabetes, to regulators next year. The drugmaker has several other promising early- and late-stage programs. Between Vertex's strong CF franchise, the multiple new products it is launching, and its solid pipeline, the stock should deliver superior returns through 2035.
