Artificial intelligence (AI) was, once again, the hottest investing topic in 2024. It might remain so in 2025, but that doesn’t mean there aren’t companies in other fields worth investing in. Consider two industries that also have excellent long-term prospects: e-commerce and cloud computing. Investing in solid companies in these fields could lead to outsized returns over the next decade and beyond. Two such growth stocks that look like excellent picks to buy this year and hold onto for a while are Shopify (NYSE: SHOP) and Veeva Systems (NYSE: VEEV).
The e-commerce market has made significant progress over the past decade, but it still has plenty of room to grow. In the third quarter, e-commerce made up just 16.2% of total U.S. retail transactions. As the shift toward online shopping channels continues, many companies helping drive this change will benefit. Enter Shopify, which is known for its tools that help merchants create and operate online storefronts. But that description just scratches the surface of what Shopify does.
The company provides many other services, from payment processing to inventory management and cross-selling tools for most major social media platforms. Further, Shopify has an app store with thousands of other options that cater to merchants’ particular needs. The business has rapidly grown its revenues over the past decade.
Shopify’s clients now control about 10% of the e-commerce market by gross merchandise volume. One knock against the company is that it isn’t yet consistently profitable. Still, it recently decreased expenses and costs, most notably by selling its low-margin logistics business. Its margins and free cash flow have improved as a result, while revenue growth remains strong.
In the third quarter, the e-commerce specialist’s top line grew by 26% year over year to $2.2 billion. Free cash flow jumped 52.5% to $421 million, while its free-cash-flow margin came in at 19%, compared to 16% in the year-ago period. It’s also worth pointing out that Shopify boasts multiple competitive advantages — its main platform benefits from switching costs, while its app store provides it with a network effect. With a moat, a history of strong financial results, and a long-term growth runway, Shopify has the tools to deliver excellent returns in the next 10 years.
Among the benefits that cloud computing provides to companies are efficiency, cost savings, and increased data security. Some of the largest corporations in the world are leaders in this field, so it’s a highly competitive market. However, Veeva Systems has become a leader in a small slice of this space: It develops cloud solutions for life sciences companies, which have unusual needs and demands.
