The current market environment has confused many investors. The S&P500 has rebounded nearly 20% from June lows, leaving investors wondering if the market has started a rally or remains in a bearish rally.
However, some growth tech stocks can still perform regardless of market conditions. Knowing this, investors looking to grow their money may want to consider Crowd (CRWD -2.68%), SentinelOne (S -5.21%)and PubMatic (PUBM -5.74%).
Crowdstrike’s AI sifts through huge amounts of data to prevent security breaches
Jake Lerch (Crowdstrike): According IBM, the average cost of a cybercrime incident is now $4.35 million. That’s a lot of dough; however, the reputational risks of a data breach can be significantly higher. With so much at stake, organizations are turning to companies like Crowdstrike to bolster their cybersecurity.
Cybersecurity is like a high-stakes chess game. On the one hand, hackers are constantly working to exploit weaknesses. Meanwhile, organizations must continually upgrade their defenses to protect their data, assets and customers. And in this endless chess match between the good guys and the bad guys, artificial intelligence (AI) is playing an increasingly important role.
Crowdstrike’s Falcon software compiles tons of data which is then analyzed by its Threat Graph AI, which predicts and prevents security breaches. Through the power of this network effect, enterprise software becomes more effective at learning and preventing breaches before they occur.
The numbers here are staggering. Crowdstrike estimates its Threat Graph AI is tracking more than 5 trillion events weekly. The company estimates that it prevents 75,000 security breaches per year by sifting through this massive amount of data and then proactively blocking suspicious activity.
Customers flock to Crowdstrike; the company now has just under 18,000 customers, a 57% year-over-year increase. Plus, its customers continue to pay more and more for its security software.
Crowdstrike remains well in the growth phase of its development. Analysts expect it to post revenue growth of 52% in fiscal 2023 (the 12 months ending Jan. 31, 2023) and 36% in fiscal 2024.
For investors looking to energize their portfolios with a high-growth tech stock, Crowdstrike is a name to remember.
A cybersecurity company whose revenue is growing at breakneck speed
Justin Pope (Sentinel One): The global economy is going digital. Whether it’s a business selling a service online or a factory using software to manage production, technology is seeping into businesses of all types. Nearly one in five CEOs in a 2021 survey cited cybersecurity risks as the biggest threat to their business in the coming years.
SentinelOne is a cybersecurity company that uses artificial intelligence to detect and deter cyber threats on its XDR platform. It maps the actions of a computer or device in stories, and the AI analyzes them to find suspicious activity in real time. This is superior to traditional antivirus software that relies on updates to stay relevant and can only identify cyber threats that already exist in its database.
The company is growing rapidly. Revenue grew 120% year-over-year in fiscal 2022, ending January 31, 2022. Management’s fiscal 2023 revenue guidance calls for 99% growth. SentinelOne serves three Fortune 10 companies and 7,450 in all.
SentinelOne is far from profitable, arguably the biggest blow to the company today. However, the operating margin has improved as revenue increases, a good sign for eventual profitability if it continues.
Fortunately, SentinelOne is loaded with money. He’s burned $128 million in the past year, but has $1.6 billion in cash against zero debt. This gives the company plenty of capital to keep its foot on the growth pedal without the short-term need to raise more money.
The stock went public last year and has become one of the most valuable companies on Wall Street with a price-to-sales (P/S) ratio of over 100. The ongoing bear market has driven prices lower while revenues continued to grow. Now at a P/S of 26, the stock is much more reasonable and could be a big winner over the years if its impressive growth can sustain its momentum.
Recession threats haven’t stopped this digital ad publisher
will heal (PubMatic): The sluggish economic environment has not stopped this advertising juggernaut. Its $1.2 billion market capitalization puts it in small-cap territory, but its platform could have an outsized impact on PubMatic’s industry as more ad spend shifts to digital formats.
PubMatic bills itself as the “supply chain of the future” for digital advertising. It provides solutions for ad buyers, developers, and publishers on mobile apps, videos, and websites. Due to the limitations AppleThe ecosystem has put on collecting consumer data, some sites have struggled to target ad spend appropriately.
Apple’s decision plays into PubMatic’s hands, as it may move ads to formats less restricted by Apple, such as connected TV. Such flexibility can be useful during a downturn, when businesses may want a different advertising strategy.
Revenue growth seems to validate PubMatic’s approach. For the first half of the year, revenues were $118 million, 26% higher than the same period in 2021. Nevertheless, the 46% increase in the cost of revenues and an increase in 30% of operating expenses weighed on profits. While it made a profit of $13 million in the first two quarters of 2022, net profit was $15 million in the same period last year.
For 2022, PubMatic estimates it will bring in between $277 million and $281 million, a 23% increase at the midpoint, down slightly from the first half. Also, it fell victim to the bear market like many other stocks. It is selling for around half of its November high.
However, it remained profitable and increased revenue despite negative economic growth. Plus, its P/E ratio of 24 makes it a cheap tech stock and probably helps it stand out from its rival. magnite, which is not profitable. As its industry continues its digital shift, PubMatic looks poised to facilitate a growing number of targeted ads.