While the S&P 500 is flat so far in 2020, heavy technology Nasdaq It has outperformed the overall market, earning more than 17%. That is not an anomaly either. The Nasdaq has outperformed both the S&P 500 and the Dow Jones Industrial Average during the periods of one year, three years, five years and 10 years. In fact, over the past decade, the Nasdaq has returned a whopping 359%, with the Dow Jones and S&P 500 returning just 153% and 191%, respectively.
This provides a fairly clear indication of why investors should include a series of tech stocks in their portfolios or risk losing better-than-average earnings. With that in mind, let’s take a look at three technology stocks that are poised for substantial growth in the next decade.
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Datadog: a need for cloud computing
One of the consequences of the pandemic has been the accelerated shift to cloud computing. This has made it more critical than ever for companies to keep their cloud-based systems up and running, as any critical issues can result in downtime that companies cannot afford, particularly with decentralized departments. of you.
That is where Datadog (NASDAQ: DDOG) comes. The cloud-native data analysis platform provides a host of services to monitor servers, databases, tools, and services. Not only does it notify companies of problems as they occur, but it also provides useful analytics that can prevent the problem from recurring in the future.
Don’t just trust my word. Datadog was recognized as a visionary in monitoring application performance, according to the research company. Gartner. Forrester Research He came to a similar conclusion, naming him the industry leader in the smart application and service monitoring space.
Strong demand for its services is evident in Datadog’s first quarter results, as revenues grew 87% year-over-year, accelerating slightly from 85% in the fourth quarter. Even more revealing, the company became profitable for the first time, as it was able to leverage its growing customer base to increase its bottom line. This also helped boost the stock’s triple-digit earnings so far this year.
The need to avoid downtime will not end when the pandemic is a distant memory, helping to fuel Datadog’s growth in the years to come.
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Zoom: when face to face it just doesn’t work
More beneficiaries of the transition to remote work are video conferencing services that allow teams to stay in touch without the need for in-person meetings that can lead to the transmission of the coronavirus. Zoom Video Communications (NASDAQ: ZM) He was there to answer the call, helping to make it one of the most popular actions of 2020.
Many investors feared that the number of free accounts would not translate into revenue growth, but nothing could be further from reality. Zoom produced successful results in its first fiscal quarter (which ended April 30), raising questions about its future growth prospects. Revenue grew 169% year-over-year, while customers who contributed $ 100,000 in 12-month final revenue was up 90%. Zoom continues to expand in the business space, as the number of clients with more than 10 employees grew by 354%. The company nearly doubled its guidance for the full year as a result of its earnings report.
The future looks equally bright for Zoom. The pandemic has no end in sight, so many companies will continue to work remotely, at least for the foreseeable future, with strong demand for the company’s video conferencing solutions. Additionally, in mid-June, Zoom announced that it had earned the coveted authorization from the Federal Risk Management and Authorization Program (FedRAMP), allowing its use by departments and agencies of the US federal government.
These factors should help Zoom continue its impressive growth in the future.
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Quickly: the name says it all
Completing our trifecta of high-growth tech stocks is Quickly (NYSE: FSLY). The well-named company uses a state-of-the-art content delivery network (CDN) to help customers achieve faster response times and fast loading of websites, photos, videos, apps, and more. This is accomplished with the help of its strategically located data centers, which form an ultrafast edge cloud platform.
With in-person transactions largely at a standstill, a company’s digital presence is more important than ever, and nothing will send potential customers to a competitor faster than slow digital access or lagged content delivery speeds. . Video streaming, e-commerce, and online gaming providers were already experiencing strong pre-pandemic adoption and all have received a boost this year, largely as a result of requests to stay home. These providers use Fastly to ensure that their offers do not suffer long loading times.
Fastly’s first quarter results help highlight the opportunity. Revenue grew 38% year-over-year, while its non-GAAP losses decreased approximately 80%. At the same time, its business customer base grew 22% year-over-year, while existing customers spent 33% more than in the same period last year.
The need for fast, secure and scalable content delivery is going nowhere and will only increase as the complexity of connections grows. Fastly’s platform has already demonstrated the ability to handle hundreds of billions of Internet requests per day.
It quickly generated $ 200 million in revenue last year and estimated its addressable market in the neighborhood at $ 36 billion. This shows that Fastly has just begun to take advantage of a great and growing opportunity, giving it plenty of room to run in the months and years to come.
YCharts data.
A word about valuation
To maintain the opportunity for ridiculous growth, all of these companies fall directly into the high-risk, high-reward category. As with many high-growth young companies, these players are not cheap at all. Datadog, Zoom and Fastly are selling at 46, 39 and 29 times the advance sales, respectively, when a good price-sales ratio is generally considered to be between 1 and 2. In addition, while Datadog and Zoom have recently made the jump to profitability Fastly continues to incur losses.
Still, if the results so far this year are an indicator, each of these tech companies seems poised for success.
