Sarah Travers
Investors seeking growth opportunities without breaking the bank often look to stocks with high potential that trade for under $100. Whether these companies have undergone stock splits or are simply undervalued, they present a unique opportunity for those willing to invest in long-term winners. Two standout stocks in this category are Shopify and Exelixis, both trading for less than $100 and showing significant growth potential.
Shopify: E-Commerce Powerhouse
Shopify, trading at around $81 per share, has established itself as a major player in the growing e-commerce industry. With its platform enabling businesses to create and manage online storefronts, Shopify has become an integral tool for many entrepreneurs. The e-commerce market in the U.S. alone still has plenty of room to expand, as it currently makes up only 16% of total retail sales. Analysts expect this percentage to increase over time, further boosting Shopify’s growth potential.
One of Shopify’s major advantages lies in the customization and flexibility it offers to businesses. With an extensive app store, businesses can tailor their online stores to meet specific needs, enhancing customer experiences. Once businesses have invested in building a customized storefront, it becomes difficult to switch to another platform, giving Shopify a competitive edge with high switching costs.
However, Shopify has faced challenges in maintaining consistent profitability. The company has made strides by divesting from its expensive and low-margin logistics business, which has improved its margins. In the second quarter of 2024, Shopify reported a 21% year-over-year revenue increase, bringing in $2 billion. Its gross margin also improved to 51.1%, up from 49.3% in the previous year. Shopify’s free cash flow surged by 243% to $333 million, and its earnings per share (EPS) turned positive at $0.13, a major improvement from last year’s loss of $1.02 per share.
While Shopify’s forward price-to-sales ratio of 11.9 might seem high compared to the undervalued range of 2 or below, the company’s dominant position in the e-commerce space and its long-term growth prospects make it a stock worth considering for growth-oriented investors. Despite the challenges it faces with profitability, Shopify is inching closer to consistent profits, making it an attractive option for those willing to hold onto the stock for five years or more.
Exelixis: Biotech with Big Potential
Exelixis, trading at approximately $27 per share, is a mid-cap biotech company that has found its niche in the competitive oncology market. The company’s flagship product, Cabometyx, has become a leading treatment for renal cell carcinoma (kidney cancer) and is approved for several other cancer types, including liver cancer. Cabometyx’s consistent growth has been a significant driver of Exelixis’ success.
In the second quarter of 2024, Exelixis reported a 35.6% year-over-year increase in total revenue, reaching $637.2 million. Cabometyx alone generated U.S. sales of $437.6 million, a nearly 7% increase from the previous year. Exelixis has been working to expand Cabometyx’s use in treating other cancers, with regulatory decisions pending in the U.S. for its application in advanced neuroendocrine tumors and castration-resistant prostate cancer.
Beyond Cabometyx, Exelixis is also developing new cancer treatments. The company is currently running phase 3 clinical trials for zanzalintinib, a potential treatment for metastatic colorectal cancer, which is the second leading cause of cancer-related deaths worldwide. Colorectal cancer is often treatable in its early stages, but once it metastasizes, treatment options become limited. Exelixis aims to address this unmet need with zanzalintinib, positioning itself for further growth in the oncology field.
Exelixis also has several early-stage programs in development, a rarity among mid-cap biotech companies, many of which struggle to maintain consistent revenue or earnings growth. Exelixis’ strong financial results, combined with its promising pipeline of new treatments, make it a stock to watch in the biotech space.
Long-Term Potential
Both Shopify and Exelixis represent unique opportunities for investors seeking growth stocks under $100. Shopify offers significant potential in the expanding e-commerce market, while Exelixis is carving out a strong position in the biotech industry, particularly in oncology. Although both stocks have challenges to overcome, their long-term prospects make them attractive options for investors looking to hold onto shares for the foreseeable future.
With Shopify continuing to improve its profitability and Exelixis expanding its cancer treatment portfolio, these two companies could provide substantial returns for those willing to invest in their long-term growth.
