Growth stocks have consistently outperformed most other asset classes in recent years, cementing their place as essential components of well-balanced portfolios. Their potential for high rewards, however, comes with increased risk. Savvy investors can capitalize on growth opportunities while minimizing unnecessary risk by targeting companies with a compelling investment thesis, a solid financial foundation, and a top-tier management team.
Intuitive Machines(NASDAQ: LUNR) and Summit Therapeutics(NASDAQ: SMMT) meet these criteria. These companies thrive in cutting-edge fields and show potential for sustained long-term growth. Let's examine the core investing thesis behind each stock.
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The new space race
Intuitive Machines etched its name in the annals of space exploration earlier this year by successfully landing their Odysseus craft on the Moon. This historic achievement marked the first U.S. lunar touchdown since 1972 and catapulted the company to the forefront of the modern space race.
Recognizing Intuitive Machines' potential, NASA recently granted the company a contract worth up to $4.82 billion for communication and navigation services in the near space region--the area extending from Earth's surface to beyond the Moon. This substantial investment validates Intuitive Machines' capabilities and solidifies its pivotal role in shaping future space exploration and infrastructure development.
Intuitive Machines' potential hasn't gone unnoticed. The company's stock price has risen by a whopping 243% this year, yet shares still have significant room to run in years ahead. Driving this potential growth, analysts project the multifaceted space industry will be worth around a trillion dollars by 2040, presenting a remarkable prospect for a company with a market cap of just $552 million.
Given these developments, Intuitive Machines is a compelling player in the burgeoning space commercialization field. However, potential investors should weigh the company's innovative prowess and strong NASA partnership against the inherent risks and long development cycles typical of the space industry. Considering these factors, it might be wise to build a position over a five to 10-year period gradually.
A rising star in cancer treatment
Summit Therapeutics has become one of the most talked-about biotech stocks this year, with its share price skyrocketing by 700%. The driving force behind this remarkable surge is ivonescimab, a potential game-changer in cancer treatment.
In 2023, Summit inked a crucial licensing agreement with China-based Akeso Biopharma for ivonescimab. This deal grants Summit the rights to market the drug in major markets including the U.S., Europe, Canada, and Japan. Akeso has already secured regulatory approval for ivonescimab in China, giving Summit a solid foundation to build upon.
Recent clinical trials have showcased ivonescimab's impressive potential. In a phase 3 study, the drug outperformed Merck's Keytruda in treating non-small cell lung cancer (NSCLC), reducing the risk of disease progression or death by 49%. This is a significant achievement, considering Keytruda's status as the current market leader with annual sales of $25 billion.
Summit isn't resting on its laurels. The company is currently conducting two late-stage trials aimed at securing approvals in the U.S. and other commercially important markets. Moreover, Summit has partnered with The University of Texas MD Anderson Cancer Center to evaluate ivonescimab's efficacy in treating various solid tumors, potentially expanding its application beyond NSCLC.
If ivonescimab continues to hit the mark in the clinic, the drug could easily hit mega-blockbuster status -- that is, greater than $5 billion in sales. This potential has catapulted Summit's market capitalization to over $15 billion at the time of this writing, even though the company doesn't yet have an approved product on the market.
While some investors might worry they've missed the boat, there's still significant upside potential if ivonescimab lives up to expectations. Success in multiple cancer indications could push Summit's valuation much higher in the coming years, and perhaps open the door to a premium-laden buyout.
However, it's crucial to remember that Summit Therapeutics remains a high-risk, high-reward investment. The company's future hinges largely on the success of ivonescimab in upcoming clinical trials and regulatory approvals. Any setbacks could significantly impact the stock price to the downside.
For investors with a high-risk tolerance and a long-term perspective, Summit Therapeutics presents an intriguing opportunity to be part of what could be the next big breakthrough in cancer treatment. As the company continues its clinical trials and moves closer to potential approvals, it's a top growth stock that warrants a closer look.
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George Budwell has positions in Intuitive Machines. The Motley Fool has positions in and recommends Merck and Summit Therapeutics. The Motley Fool has a disclosure policy.
