Should you invest in stocks right now? Some might be hesitant to do so because of the volatility broader equities have faced this year. Others understand that the stock market generates excellent returns over the long run, regardless of short-term uncertainty.
I firmly belong to the second camp. The key is to invest in companies that are likely to deliver strong financial results and returns over five years or more.
For those who, like me, are still seeking quality stocks to invest in, let's consider two companies whose prospects look robust: Shopify (SHOP +5.93%) and Axsome Therapeutics (AXSM 1.08%).
Here's why I'd invest $1,000 in either of these companies right now.
Image source: Getty Images.
1. Shopify
Shopify has outperformed the broader market since its 2015 initial public offering, but there's still considerable growth potential left for the stock, making it a strong buy at current levels.
Consider these several aspects of Shopify's business that render its long-term prospects attractive.
First, Shopify has been a pioneer in its niche of the e-commerce market: It's a leader in helping merchants create online storefronts. Shopify's main advantage doesn't just come from its first-mover status. It offers a suite of valuable products for online merchants, including tools that help its clients manage payments, marketing, and analytics, as well as sell their products across major social media platforms. It also features an app store that allows merchants to customize their storefronts to their liking.
Second, Shopify benefits from a moat thanks to its platform's switching costs and its app store's network effect. These competitive advantages should allow it to remain a leader in its niche for a long time. Shopify has a share of more than 12% in the U.S. e-commerce market, measured by gross merchandise volume.
NASDAQ: SHOP
Key Data Points
Third, there's considerable room for growth in e-commerce. As of the first quarter, only 16.2% of retail sales in the U.S. happened online. What's more, Shopify operates in more than 175 countries, almost all of which have lower e-commerce penetration than the U.S. The opportunities ahead are massive.
Some might point out that the company will face stiff competition, and that it remains unprofitable. These are potential challenges to monitor, but in my view, they do little to change Shopify's prospects. It has performed well for years despite competition, and has increased its market share in recent years -- from the 10% it had as of the end of 2023. And while there's still red ink on the bottom line, Shopify's massive growth avenues combined with recent strategic changes -- notably, getting rid of its low-margin logistics business -- should allow it to become profitable within a few years.
So, Shopify remains a solid buy. And with $1,000, you could acquire seven of its shares, leaving you with some spare change.
2. Axsome Therapeutics
Axsome Therapeutics, a mid-cap biotech company, has been on a roll over the past three years, thanks to solid clinical and regulatory progress.
The company's current lineup of approved medicines includes Auvelity, a therapy for major depressive disorder (MDD); Symbravo, a treatment for acute migraines; and Sunosi, a medication for excessive daytime sleepiness associated with sleep apnea or narcolepsy. Axsome acquired Sunosi from Jazz Pharmaceuticals in 2022.
The stock has performed well in recent years, largely thanks to progress with Auvelity. The best part is that Axsome is still looking at important catalysts on the horizon. It expects to submit regulatory applications for AXS-12, a potential treatment for cataplexy in patients with narcolepsy, by year-end. And after Auvelity successful results in phase 3 studies for Alzheimer's disease agitation, the company is seeking a label expansion in that indication. Axsome Therapeutics is on track to submit a regulatory application in the third quarter.
Furthermore, recent phase 3 results for solriamfetol (the generic name for Sunosi) in ADHD open the door for a label expansion for the medicine. The company is also set to initiate late-stage studies in MDD sometime later this year.
NASDAQ: AXSM
Key Data Points
Now, Axsome has encountered some headwinds. The U.S. Food and Drug Administration recently rejected its application for AXS-14 as a potential treatment for fibromyalgia. The agency argued that one of the studies Axsome used to support approval was not adequate. The company plans to run another clinical trial starting in the fourth quarter to address this problem.
These issues are not uncommon for smaller biotech companies. Axsome Therapeutics encountered regulatory delays in its quests to launch Auvelity and Symbravo, yet it was able to launch both. It has performed well in recent years despite these headwinds.
The biotech remains an attractive stock because its lineup of approved products should drive solid top-line growth for the foreseeable future, and its late-stage pipeline is likely to improve its financial results.
Axsome Therapeutics is well on its way to becoming a more prominent biotech, and it's not too late to invest in the stock. With $1,000, you can purchase nine of the company's shares.
