Forget Microsoft: Two Tech Stocks to Buy with Potential for Explosive Growth
While Microsoft (NASDAQ: MSFT) remains a formidable tech giant, investors seeking more explosive growth opportunities might consider exploring two lesser-known tech stocks:
1. Cloudflare, Inc. (NYSE: NET)
Business:
Cloudflare is a cloud-based cybersecurity and performance platform that protects websites, applications, and APIs. It provides a wide range of services, including DDoS mitigation, web application firewall, content delivery network, and caching.
Growth Drivers:
*
Accelerating digital transformation:
The rapid adoption of cloud computing, e-commerce, and mobile technology is driving demand for Cloudflare’s services. *
Cybersecurity threats:
The increasing frequency and sophistication of cyberattacks necessitates effective security measures. Cloudflare’s platform provides businesses with robust protection. *
Global expansion:
Cloudflare has a global presence with data centers in over 100 countries. This allows it to serve customers worldwide and capture market share in emerging markets.
Financial Performance:
* Revenue growth of 41% YoY in Q1 2023 * Gross margins of 79% * Net income margin of 13%
Valuation:
Cloudflare trades at a forward P/S ratio of 23x, which is relatively high but justified by its strong growth prospects.
2. CrowdStrike Holdings, Inc. (NASDAQ: CRWD)
Business:
CrowdStrike is a cybersecurity company that specializes in cloud-native endpoint security. Its Falcon platform provides real-time protection against cyber threats and threats intelligence.
Growth Drivers:
*
Work-from-home trend:
The shift towards remote work has increased the risk of cyberattacks on endpoints. CrowdStrike’s cloud-based platform is well-suited for this environment. *
Sophisticated threats:
CrowdStrike’s platform employs machine learning and artificial intelligence to detect and respond to zero-day threats and advanced persistent threats. *
Industry leadership:
CrowdStrike is recognized as a leader in the endpoint security market by industry analysts and customers.
Financial Performance:
* Revenue growth of 63% YoY in Q4 2023 * Gross margins of 77% * Net income margin of 21%
Valuation:
CrowdStrike trades at a forward P/S ratio of 19x, which is attractive given its strong financial performance and growth potential.
Conclusion:
While Microsoft remains a solid investment, Cloudflare and CrowdStrike offer more explosive growth opportunities in the rapidly evolving tech market. Their strong leadership in their respective cybersecurity niches, accelerating growth drivers, and attractive valuations make them compelling investments for investors seeking high-potential tech stocks.
Forget Microsoft: Two Tech Stocks to Buy
Original article by:
Michael Kramer, Mott Capital Management
Published on:
Yahoo Finance, August 29, 2023
Summary:
In this article, Michael Kramer argues that while Microsoft (MSFT) is a solid long-term investment, investors should also consider two other tech stocks with higher growth potential: *
Cloudflare (NET):
A cloud-based security, performance, and reliability company with a strong track record of innovation and customer adoption. *
Datadog (DDOG):
A cloud-based monitoring and analytics platform that provides actionable insights for businesses to optimize their operations.
Key Points:
* Both Cloudflare and Datadog are experiencing rapid revenue growth and have strong margins. * They operate in large and expanding markets with significant tailwinds driving their businesses. * While they are more speculative investments than Microsoft, Kramer believes they have the potential to deliver superior returns over the long run.
Conclusion:
Kramer recommends investors diversify their tech holdings by adding Cloudflare and Datadog to their portfolios alongside Microsoft. He emphasizes that these two stocks offer the potential for high growth and strong returns, making them attractive investments for investors seeking exposure to the future of technology.