It's not possible to go back in time and invest in Nvidia or Amazon when they were still relatively small companies. However, it is possible to identify corporations that appear poised to establish themselves as leaders in their respective industries. Doing so and investing in those companies can help investors earn outstanding returns over the long term. Let's consider two stocks that may fit the bill: SoFi Technologies (SOFI 2.25%) and Summit Therapeutics (SMMT 3.52%). Here's why these companies might be worth investing in today.
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1. SoFi Technologies
SoFi Technologies is a financial services company that is gaining prominence. Part of its appeal comes from the fact that it is an entirely online bank, without a single retail location. That's a familiar business model, especially for younger consumers who make up much of its clientele. Although it was initially created to help college graduates refinance their student loans, SoFi has since evolved. It offers a range of traditional banking services, which have helped attract many more clients. As of the end of the third quarter, SoFi had 12.6 million customers, representing a 35% year-over-year increase.
Looking forward, the fintech specialist has catalysts that should help it perform well in the long term. One of them is that it continues to add new products to its ecosystem. The company is reentering the crypto trading market after staying out of this lucrative (albeit volatile) business. Second, SoFi makes meaningful revenue by cross-selling additional services to existing members. In that department, there is still plenty of room to grow, as it currently has just 1.5 products per member, despite having many more available.
NASDAQ: SOFI
Key Data Points
Customer growth should be another key long-term tailwind. Younger individuals are entering the workforce and starting to accumulate capital and require banking services. SoFi is well positioned to capture a meaningful share of this opportunity thanks to the company's digital-first approach. Of course, there are some risks to be aware of. SoFi has been criticized for relying too much on personal loans, which are generally riskier than other types.
However, SoFi seeks to mitigate this by targeting individuals with high credit scores -- in the third quarter, the company's personal loan borrowers had an average credit score of 745, which is higher than the national average. SoFi is shaping up to be the bank of the future, and there could be significant upside ahead for the fintech as it continues to establish itself.
Buying the company's shares today and holding them for a while could lead to superior returns.
2. Summit Therapeutics
Summit Therapeutics, a biotech company, is developing a potential cancer therapy called ivonescimab, which it licensed from Akeso Biopharma, a China-based company. The oncology market is vast and highly competitive, but Summit could make a significant impact and carve out a meaningful niche thanks to ivonescimab. This therapy, which is already approved in China, proved more effective than Merck's Keytruda in a phase 3 clinical trial in patients with advanced non-small cell lung cancer (NSCLC) and a PD-L1 protein overexpression. Here's why that's important.
Keytruda is the best-selling cancer medicine in the world and the second-best overall. It has earned dozens of indications in many countries, but none more important for its sales than the lung cancer market. That's because it is the leading cause of cancer death, and the NSCLC variety makes up about 85% cases of it. In other words, a significant percentage of Keytruda's blockbuster sales likely come from this niche.
NASDAQ: SMMT
Key Data Points
Ivonescimab became the first medicine on record to outperform Keytruda in a late-stage study in NSCLC. Summit Therapeutics seems to have a winner on its hands, especially since the medicine boasts so-called pipeline in a drug potential. It is being investigated for treating several other forms of cancer. According to some projections, Summit Therapeutics could generate some $53 billion in annual sales at its peak.
As it holds the rights to the medicine in most markets outside China, Summit could make substantial profits along the way. Naturally, Summit Therapeutics faces some risks, including potential clinical or regulatory setbacks, as well as increased competition from several drugs seeking to challenge Keytruda's market share. However, it could become a prominent biotech in due time, given the exciting pipeline progress ivonescimab has made so far. Considerable upside potential may remain for the stock.
