When it comes to buying stocks to grow your investments, there are hardly any guarantees. Great rewards come with great risks. Readers may avert much of the inherent downside with screaming stock opportunities.
For example, the price paid may lower the risks by giving investors a bigger margin of safety. So, if investors pay for a stock at below its intrinsic value, it will offer a degree of safety. Conversely, a stock that just rallied could fall just as quickly. Buying those momentum-driven stocks will not pay off if the buying suddenly dries up.
Among the hot, fast-growing sectors, the software sector offers screaming stocks to buy if you are looking for sure-fire winners.
Some of the names listed below recently posted strong quarterly earnings reports. The growth rate re-affirms their worth and the potential upside offered in the year ahead. The companies are:
- CrowdStrike Holdings (NASDAQ:CRWD)
- Elastic (NYSE:ESTC)
- MongoDB (NASDAQ:MDB)
- Cloudflare (NYSE:NET)
- Roku (NASDAQ:ROKU)
- The Trade Desk (NASDAQ:TTD)
- Zoom Video Communications (NASDAQ:ZM)
Growth and overall stock score
In the chart above, TTD stock scores the highest overall and on growth.
Conversely, Cloudflare and Elastic have low overall scores. Yet both stocks will benefit from strong growth ahead.
As software demand rises, sales will lead to better quantitative scores.
CrowdStrike Holdings (CRWD)
CrowdStrike Holdings posted impressive annual recurring revenue in the first quarter. Net new ARR topped $144 million as net new subscription customers rose by 1,524. CRWD stock has gained 4.85% since the June 3 earnings report.
CEO George Kurtz said, “We believe the robust demand environment driven by secular trends, such as digital and security transformation, cloud adoption and a heightened threat environment.” He told conference call participants that its competitive holistic solution works across multiple clouds. The company is adding more capabilities, such as drift detection, which improves threat detection.
The cloud is a hot buzzword but CrowdStrike is embracing this greenfield opportunity. Furthermore, the product has virtual instances on its workload that customers get real-time protection. Using machine learning, the product identifies threats and prevents them from spreading to a user’s environment.
CRWD stock should continue climbing. Customers save money using CrowdStrike’s product compared to paying ransomware or suffering from lost productivity.
Elastic (ESTC)
In the fourth quarter (April end), Elastic posted revenue growing by 44% to $177.6 million, Software-as-a-Service revenue up 77% to $51.3 million, and full-year 2021 revenue up 42% to $608.5 million. ESTC stock has gained 15.4% since the June 2 earnings release.
The company, founded in 2012, now has over 15,000 subscription customers. It has a flexible deployment model, be it on-premise, hybrid, or hybrid cloud. That should improve its reach as customers adjust to a post-pandemic world. The software will work to benefit from the remote work environment or with staff returning to the physical workspace.
Elastic has a moat and an edge over the competition. Splunk (NASDAQ:SPLK), for example, continues to lose market share to Elastic. Conversely, Elastic does not treat data as a problem. It views data as a feature and capability. As CEO Shay Banon explained, Elastic gives better search results. Plus the solution gives better linking in critical supply chains. Customers cannot afford not to have an Elastic solution.
On Wall Street, analysts have an average price target of almost $180, according to data compiled by TipRanks.
MongoDB (MDB)
MongoDB is a document-oriented database with some 25,000 fee-paying customers and over 1.5 million free users. MongoDB provides both licenses as well as subscriptions as a service for its NoSQL database.
On June 3, it posted exceptional first-quarter results and investors have pushed up MDB stock 16.2% in the days since.
MongoDB posted revenue growing by 39% Y/Y to $181.6 million. CEO Dev Ittycheria highlighted the ongoing strength of Atlas, its core product. The company launched Atlas five years ago on the belief that customers would benefit from a fully managed MongoDB database. In Q1, gross profit topped $127.1 million. Although the gross margin was 70%, it posted a loss from operations of $61.4 million. It lost $1.04 a share in the quarter.
MDB ended the quarter with $935.6 million in cash and cash equivalents. In Q2, the company expects revenue in the range of $180 million – $183 million. It also forecasted a loss per share estimate of 40 cents to 43 cents. MDB’s Atlas performance is a key figure. Customer demand for the cloud-native database service is growing from 60% last year to over 70% this year.
Investors may bet on NoSQL database market share growth. These are often referred to as “nonrelational to highlight that they can handle huge volumes of rapidly changing, unstructured data in different ways than a traditional relational (SQL) database with rows and tables. In this niche, MDB is leading the charge.
Cloudflare (NET)
Cloudflare is a content delivery network supplier that offers security, performance, and reliability to customers. Its strong Q1 results only re-affirm the business strength ahead.
Since the May 6 earnings release, the NET stock price is up 36.1%.
Cloudflare posted revenue growing by 51% to $138.1 million. It added a record 120 large customers who now represent more than 50% of revenue. CEO Matthew Prince highlighted on the conference call the team’s ability to get to 123% dollar-based net retention. The company may face some headwinds in China. Still, it baked the potential shortfall in its guidance.
The company is managing its go-to-market footprint outside of the U.S. well. In China, revenue headwinds from Baidu (NASDAQ:BIDU) ramping down are offset by JD.com (NASDAQ:JD) tracking the company’s expectations.
CFO Thomas Seifert differentiated Cloudflare’s content delivery network (CDN) business apart from the competition. He said that CDN was a means to achieve services and products at the edge of its network. It delivers security and performance-based products to customers.
Co-founder and CEO Matthew Prince is obsessed with offering the fastest CDN on the market. Customers get services quickly. That is how Cloudflare wins more deals.
Roku (ROKU)
Skeptics doubt that Roku’s online streaming audience momentum will sustain as the pandemic winds down. Yet advertisers are following the viewers to streaming. Roku is monetizing that transition.
ROKU stock hit a three-year high of $486.72 a share in mid February, and has dropped back nearly 26% as vaccinations picked up and the U.S. economy began its slow reopening.
CFO Steve Louden said that Roku is good at monetizing targeted premium cost per thousand (CPM) ads. Viewer engagement with advertisers is high. This is driving ad inventory higher and lifting Roku’s revenue.
The Roku Channel is central to balancing non-ad-based revenue and did so over the last 3.5 years. Furthermore, Roku Originals is built on a free ad-supported model. With few alternatives for consumers, Roku may build its audience by growing its content and monetizing the channel through CPM ads.
ROKU stock is a screaming buy because the growth trajectory shows no sign of slowing. It more than doubled Y/Y. That momentum will give Roku the room to build its licensing partnerships.
Publishers get a 50/50 revenue share split. Content suppliers get a spot on the growing Roku Channel while the company collects operates on expanding profit margins.
The Trade Desk (TTD)
Trade Desk shares peaked at close to $1,000 at the end of last year. In its last quarterly report, the company tempered growth expectations. This will ultimately benefit investors by scaring away speculators.
In the last quarter, The Trade Desk posted strong growth as it led the Connected TV (CTV) market. Revenue grew by 36.8% to $219.8 million. It posted a 45 cent per share in earnings (or $1.41 a share on a non-GAAP basis). In the second quarter, Trade Desk forecast revenue will top $262 million. It expects an adjusted EBITDA of at least $84 million.
On its conference call, founder and CEO Jeff Green told TTD stock investors that the company’s customer CTV spending more than doubled year on year. It enables TTD to widen its CPM lead over traditional television.
So, as the audience shifts away from the TV market, TTD will benefit from the growing revenue. It will invest the incremental dollars into digital and programmatic. In the long-term, the company will lead in the CTV market and command a bigger slice of the addressable market.
Zoom Video Communications (ZM)
Whenever a company’s name becomes a verb, the stock is likely to offer multi-bagger returns for years to come. Zoom Video is one such company. ZM stock is off 28% from its late November 2020 all-time high.
The company’s revenue nearly doubled in the last quarter as free cash flow soared. Zoom also posted a strong outlook for the current second quarter.
In the first quarter, Zoom posted revenue growing by 191% Y/Y to $956.2 million. It now has over 160% more of its customers contributing to over $100,000 in annual revenue.
For the full fiscal year, CEO Eric Yuan forecast total revenue in the range of $3.975 billion to $3.99 billion. Skeptical investors who thought the Covid-19 pandemic created a temporary spike in demand are wrong. The video-chatting service will keep growing.
To leverage its strong operating margins from its video service, Zoom introduced a phone appliance.
As shown in the presentation, Zoom will have at least three base station phones with cameras. This protects Zoom from copycats who offer similar services. Zoom will have devices that increase the user base. This would dissuade customers from using other video conference calling services.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.