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along with Nasdaq Index With the index soaring about 60% from its bear market lows, finding reasonably priced tech stocks has become increasingly difficult. However, by focusing on fast-growing companies operating in markets that have been riding high for decades, investors can find some top stocks at reasonable valuations.
mass strike (NASDAQ: CRWD) and Clear and safe (NYSE: YOU) Two companies meet this requirement and will see sales grow by 36% and 40% respectively by 2023. Both companies are in the cybersecurity space: CrowdStrike’s platform reduces the number of vendors companies need to protect themselves from threats, while Clear Secure’s biometric solutions make security checkpoints easier to manage.
Here’s why to buy these two super-powerful tech stocks today.
CrowdStrike: Cybersecurity Integrator
CrowdStrike’s Falcon platform is powered by artificial intelligence (AI) and machine learning (ML) and provides customers with more than 20 modules – unique cybersecurity products. CrowdStrike’s many modules cover areas such as cloud and endpoint security, threat exposure management and information technology (IT) automation, making it perfect for vendor integration.
A recent study by research firm Gartner Corporation found that 75% of enterprises are looking to consolidate the number of cybersecurity vendors they work with. Against this backdrop, CrowdStrike’s broad offering becomes increasingly valuable. In fact, 64% of the company’s customers already use five or more modules, and 27% use seven or more modules, highlighting CrowdStrike’s integration capabilities. With most customers adopting many mods, the company has 580 customers spending more than $1 million annually on its platform, growing 33% through 2023.
Such a long customer list provides the company with a wealth of data that can be fed into an AI-driven threat map. Filtering more than 1 trillion data points every day, the company becomes more robust with every new customer added and every new module a customer purchases. As each client and module is added, its network becomes stronger and stronger, and it becomes more attractive to potential clients, creating a virtuous cycle.
Driven by this emerging network effect, CrowdStrike’s revenue has grown 12 times since its initial public offering in 2019, driving its stock price to rise more than 400% during the same period.
That gives the young cybersecurity company a market capitalization of about $78 billion at recent prices. However, with consulting firm McKinsey predicting that the cybersecurity industry will grow from $150 billion today to $1.5 trillion to $2 trillion in the long term, that market value may be laughably small by 2034.
Holds a long list of awards and leadership titles from research firms such as Gartner forrest, CrowdStrike is well-positioned to remain the most significant disruptor in cybersecurity. This recognition of leadership, coupled with the company’s growing module lineup, expanding network, and impressive ability to generate free cash flow (approximately one-third of last year’s revenue), makes CrowdStrike a The perfect tech stock to buy today and grow over time.
Clear Secure: high growth, abundant cash, low valuation
While CrowdStrike’s goal is to serve as many customers as possible in as many cybersecurity areas as possible, Clear Secure’s primary focus is: authentication. Known for its 147 Clear Plus member-only priority lanes at 56 U.S. airports, Clear Secure uses its biometric authentication capabilities to help its members move quickly through security checkpoints.
For $189 per year, customers can access these priority lanes by uploading their driver’s license or passport to the Clear mobile app or airport kiosks. This time-saving, stress-reducing solution has proven to be a no-brainer for frequent travelers, with Clear Secure currently having 6.7 million paid members, a number that will grow 31% in 2023.
In addition to these members, the company has 13 million non-paying members who use the Clear app to get flight details such as gate numbers or estimated walking times to the terminal. This “home-to-door” feature pairs perfectly with the company’s free booking solution, which allows members to book a time to go through security (but not as quickly as Clear Plus members).
The best part for investors is that the company has ambitions to expand its identity verification capabilities into new pipelines. Through its business-to-business product, Clear Verified, the company partners with businesses in professional sports leagues, e-commerce, retail, financial services, hospitality and healthcare. A major success story in this new growth area is its partnership with LinkedIn, which allows members to confirm their identity for free through Clear Secure and receive verification indicators on the site.
With more and more use cases, it’s no surprise that Clear Secure’s revenue will grow 40% in 2023. While that growth is exciting in its own right, it may be overshadowed by the company’s ballooning free cash flow margins. 33%.
These results should not be a one-time feat. In fact, this free cash flow, along with Clear Secure’s sales, should grow more than 30% by 2024, according to management.
What’s the cherry on top for investors? Despite a shift to strong cash generation, the company trades at just 9 times FCF.
With over $700 million in cash and marketable securities, no debt, and nearly $200 million in free cash flow in 2023, management increased its stock repurchase authorization to $128 million to take advantage of the current low valuation. In addition to these buybacks, these cash reserves should easily fund growing dividends, which yield about 1.3% at recent prices, especially since these payouts only use Clear Secure’s annual free cash flow. 16%.
The combination of high sales growth, strong free cash flow generation, strong cash returns to shareholders, and a discounted valuation make Clear Secure a top-notch technology stock worth buying without hesitation.
Should you invest $1,000 in CrowdStrike right now?
Before buying CrowdStrike stock, consider the following factors:
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Josh Kohn-Lindquist serves at Clear Secure and CrowdStrike. The Motley Fool holds positions and recommends Clear Secure and CrowdStrike. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
Buy Two Super Tech Stocks Without Hesitation originally published by The Motley Fool
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