2 Growth Stocks to Buy in 2025 and Hold for a Decade

Source The Motley Fool

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).

1. Shopify

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.

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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.

SHOP Revenue (Quarterly) Chart

SHOP Revenue (Quarterly) data by YCharts.

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.

2. Veeva Systems

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.

Life science companies must jump through numerous regulatory hoops, and to develop their products, they regularly must make large upfront investments without any guarantee of a payoff. For corporations in this industry, opting for a large cloud provider versus choosing a specialist like Veeva System is like hiring a handyman to do the job of an electrician. Veeva's highly specialized solutions have helped it land many large and prominent life science corporations on its client list.

Its financial results over the past 10 years have, as a result, generally been excellent.

VEEV Revenue (Quarterly) Chart

VEEV Revenue (Quarterly) data by YCharts.

The company also benefits from high switching costs -- its clients can't easily move to a different service provider without risking business disruptions. In a highly regulated industry, that can be serious trouble. Further, Veeva Systems estimates that its total addressable market is $20 billion -- and its estimates on that score have generally grown over time along with the life sciences industry.

But even sticking with the $20 billion figure, Veeva Systems' trailing-12-month revenue of $2.7 billion was a fraction of that total. Even without its addressable market growing further, Veeva Systems should increase its revenues meaningfully in the next five years as it captures a larger share, perhaps just 30%, of its market. And over the next decade, Veeva Systems' results and its stock price performances could look much like they have in the past.

Should you invest $1,000 in Shopify right now?

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Prosper Junior Bakiny has positions in Shopify. The Motley Fool has positions in and recommends Shopify and Veeva Systems. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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