Is Cathie Wood a genius investor? The CEO of Ark Invest, an investment management firm, rose in prominence in the early days of the pandemic; her firm's actively managed ETFs performed well even as the rest of the market was moving in the wrong direction.
While her performance has been more mixed since, there is no question that some of Wood's picks look like long-term winners. Let's consider two of the bunch that could deliver outsized returns through 2030: Regeneron Pharmaceuticals (REGN -0.60%) and Shopify (SHOP -1.62%).
1. Regeneron Pharmaceuticals
Regeneron has been performing exceptionally well -- and is up over 200% -- since January 2020. The biotech pulled that off despite multiple headwinds. One of the company's biggest cash cows, Eylea, which treats wet age-related macular degeneration (an eye disease), faces risks from biosimilars. In fact, a couple of Eylea biosimilars were approved by the U.S. Food and Drug Administration earlier this year. Beyond that, Eylea has been fighting off competition from Roche's Vabysmo since the latter's approval in January 2022.
Revenue has also been a bit inconsistent due to pandemic-related issues. However, the drugmaker has managed better than fine. Its COVID-19 antibody, REGEN-COV, generated meaningful sales earlier in the outbreak. And while it is no longer authorized in the U.S., it was arguably never an important part of Regeneron's long-term plans. The strong yet somewhat inconsistent revenue from this product makes comparisons to prior years unflattering to Regeneron, but it allowed the company to generate sales it otherwise wouldn't have. Overall, the biotech's financial results have been solid.
And regarding Eylea, while some envisioned that competition, biosimilar or otherwise, would sink its sales, Regeneron launched a high-dose formulation of the medicine last year, which is helping its revenue stay afloat. In the second quarter, combined net sales from Eylea and Eylea HD increased 2% year over year to $1.53 billion. Regeneron's Dupixent, a therapy for eczema co-marketed with Sanofi, continues to be its biggest growth driver.
Regeneron reported $1.1 billion in collaboration revenue from Sanofi in the second quarter, an increase of 21% year over year. Regeneron's total revenue was $3.55 billion, 12% higher than the prior-year quarter. The company might not deliver strong financial results every single quarter; no corporation does. Regeneron's ability to manage challenges is what matters most. The biotech was able to smooth out the Eylea-related losses and make the best of a bad situation during the pandemic by developing a COVID-19 antibody, thanks to its innovative abilities.
And Dupixent is still awaiting an important label expansion in the U.S. in treating chronic obstructive pulmonary disease (COPD).
Regeneron's shares jumped once it announced Dupixent's strong results in a pivotal clinical trial in treating COPD. It's no wonder. Some analysts predict that this indication could add about $3.5 billion in annual sales to the medicine and help it reach peak revenue of $20 billion -- for reference, Dupixent's sales last year came in at an already impressive $11.6 billion. In other words, the eczema treatment should be a key growth driver through the end of the decade.
Beyond those, Regeneron has a rich pipeline of products, some of which will earn approval in the next few years. The drugmaker is working on a gene therapy for genetic deafness, for instance. Regeneron's solid underlying business, strong pipeline, and proven track record inspire confidence. I'd back the stock to beat the S&P 500 through 2030.
2. Shopify
Shopify's shares were in free fall for about a year, starting in late 2021. The company dealt with slower revenue growth than usual, net losses, and increasing interest rates, factors that make investors switch out unprofitable high-growth companies for those with more stable and consistent earnings potential.
Shopify has recovered somewhat -- shares have more than doubled since late 2022 -- partly due to several changes it made.
Most notably, it sold its logistics business to focus on its stronger and high-margin e-commerce operations. The move has helped Shopify boost its margins and net income. In the second quarter, the company's revenue increased by 21% year over year (25% when accounting for the sale of its logistics unit) to $2.04 billion. Shopify's gross profit was up 25% year over year to $1 billion, for a gross margin of roughly 51.1%, higher than the 49.3% reported in the year-ago period. It turned a net loss per share of $1.02 into net earnings per share of $0.13.
Free cash flow soared 243% to $333 million, and the free cash flow margin of 16% was far better than the 6% reported in the prior-year quarter.
Shopify still has plenty of growth potential; industry analysts project the e-commerce industry to grow rapidly through 2030. The company has built a solid brand name in what it does: It provides merchants with a quick and simple way to build and customize an online storefront, which can help them sell their products through every major social media channel, integrate brick-and-mortar stores, and do much more.
Now that it's laser-focused on its e-commerce business and leaving the logistics side to someone else, Shopify could perform even better. Shopify has performed in line with the S&P 500 since early 2020, but its improved business could allow it to do much better than that through the end of the decade.
