2 stocks that could outperform the next bull market

Has the stock market bottomed out? The latest inflation data helped lift stocks, but the truth is, the economy is not out of the woods just yet. Some economists predict that a recession could be on the way, and geopolitical issues also remain. No one can say for sure that market indexes won’t sink even further.

But eventually there will be a bull market, it always happens. Let’s look at two titles worth owning when this happens: Eli Lilly (LLY 1.37%) And Shopify (SHOP -4.30%).

1. Eli Lilli

Eli Lilly is currently dominating the market, with its shares up 29% so far this year.

The company does not owe this performance solely to its financial results. In the third quarter, Eli Lilly revenues increased 2% year over year to $6.9 billion; The drugmaker’s top line increased 7% year over year in constant currency terms. Bottom line, Eli Lilly’s adjusted earnings per share (EPS) were $1.98, up 12% from the year-ago quarter.

Perhaps Eli Lilly’s most crucial growth driver has been the progress of its pipeline. The company secured a major endorsement this year and is working on other exciting candidates. The approval in question was that of Mounjaro, a treatment for type 2 diabetes. Analysts have high hopes for this medicine. Between its current indications and the label’s potential expansions into treating obesity and other conditions, some experts believe it will reach an annual sales peak of $25 billion.

For context, rheumatoid arthritis medicine Humira, the best-selling drug in history, reached a sales peak of $20.7 billion last year. There are other key programs in Eli Lilly’s pipeline. They include donanemab, a potential therapy for Alzheimer’s disease, and Basal Insulin-FC, an investigational once-weekly product for diabetes.

During the third quarter, the drugmaker filed an application for lebrikizumab, a potential therapy for atopic dermatitis, with regulators in the United States and Europe. Of course, some of Eli Lilly’s existing products continue to perform well, including the immunosuppressant Taltz, the cancer drug Verzenio, and the diabetes medicine Trulicity. In the third quarter, Taltz sales increased 15% year over year to $679.9 million.

Verzenio’s revenue increased 84% year over year to $617.7 million, while Trulicity’s revenue increased to $1.9 billion, up 16% from the same period a year ago. Eli Lilly’s new products will replace older ones, such as the cancer drug Alimta, which is facing competition from generics and losing market share. Eli Lilly’s prospects are solid thanks to its deep pipeline, and the pharmaceutical company is well positioned to continue beating the market.

2. Shopify

Shopify’s stock is down 71% this year. The e-commerce specialist struggled amid slowing revenue growth and a dim outlook related to macroeconomic challenges. However, it is essential to contextualize these challenges. Shopify’s declining revenue growth rates aren’t all that surprising, considering what’s happened over the past three years.

The company benefited from a coronavirus-related tailwind in 2020 and 2021 as people made more purchases online due to the pandemic. Once the outbreak slowed and shopping habits returned to some semblance of pre-pandemic normality, it made for tough year-over-year comparisons for Shopify.

And while a recession could hurt Shopify, the company continues to make huge strides by helping build and manage thousands of online storefronts for small businesses around the world. In the third quarter, Shopify’s gross merchandise volume (GMV), the total value of transactions on its platform, grew 11% year over year to $46.2 billion.

Shopify’s GMV is still moving in the right direction, indicating that its strong business can handle economic slowdowns. Company revenues during the period increased 22% year over year to $1.4 billion, and adjusted net loss was $0.02, compared to adjusted earnings per share of $0.08 during the third quarter of 2021.

There’s a solid argument that Shopify could continue to struggle with the market and the economy. Its spending is on the rise, and with consumers continuing to hold back on spending, revenue growth for next year may not be as impressive as it once was. Even the company’s persistent net losses won’t help its cause.

However, Shopify is building a strong foundation for the future by providing businesses with everything they need to run their online and physical operations. The company boasts thousands of apps to help merchants customize their stores, as well as a fulfillment network, inventory services, and more.

These related services make it difficult for Shopify’s customers to look elsewhere, providing the company’s platform with high switching costs – a powerful competitive advantage. Once the economy recovers, look for consumers to increase spending, which should help boost the company’s GMV and revenue.

With plenty of room to grow in e-commerce, including overseas, Shopify will be able to profit from the investment it’s currently making to capture a good chunk of this massive worldwide opportunity. Despite its poor performance this year, Shopify has crushed the market since its 2015 initial public offering. In my view, it can do it again for investors with a long enough horizon.

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