Despite its share-price slide earlier this week, Tesla's (NASDAQ: TSLA) stock has been on a tear this year. The electric-vehicle maker has seen its share price climb an impressive 340% year to date, as investors have flocked to tech stocks over the past few months.
If Tesla's business isn't your cup of tea, don't fret. There are plenty of other high-growth tech stocks that could be fantastic long-term investments. To help you find a few, we asked three Motley Fool contributors for their top picks right now, and they came back with MongoDB (NASDAQ:MDB), Zoom Video Communications (NASDAQ:ZM), and Square (NYSE:SQ). Read on to find out why.
MongoDB: the Tesla of the database industry
Brian Withers (MongoDB): Gasoline-fueled engines have been the primary way cars have generated power since Ford's Model-T in the early 1900s, but Tesla is changing that. It may not have built the first electric vehicle, but it has certainly created an incredibly popular lineup of cars that are disrupting the auto industry's long-term love affair with the internal combustion engine. MongoDB is doing the same thing for databases.
Since the 1970s, the world's most popular databases have run on an architecture based on rows and columns referred to as a Structured Query Language (SQL) database. But MongoDB's document (or no-SQL) database was built from the ground up to enable today's high-performance cloud applications. Like Tesla, it is just beginning an incredible runway of growth.
Over its last three years, MongoDB has put up an impressive compound annual growth rate of 61%. With the coronavirus slowing business investments, the database specialist has seen a cooling off of growth, hitting 46% and 39% year-over-year growth for its first quarter and second quarter, respectively. But the database market is growing to $97 billion by 2023, and MongoDB's $502 million in trailing twelve-month revenues put its share at under 0.5%. This disrupter has plenty of room to grow with its flagship Atlas product leading the way.
Atlas is MongoDB's cloud-based product that allows software developers to start with a free trial to build prototypes and scale up as needed. Atlas revenues grew 66% in Q2, expanding it to a substantial 44% of the total top line with over 18,800 customers. This cloud-based model allows the company to keep tabs on developers, providing insights into how to improve the product and giving the sales teams solid leads for those customers that could be much larger customers in the future.
MongoDB's developer-focused platform had made it the most popular document database as rated by DB-Engines, giving it incredible momentum to continue to grow for years to come. With the stock taking a step back recently, now would be a great time to get in on the Tesla of the database industry.
Business meetings have changed forever
Danny Vena (Zoom): I get the allure of investing in a revolutionary company like Tesla, and I'm even a shareholder. That said, I think investors would be better off buying Zoom Video Communications, which has everything Tesla has to offer -- and more.
The pandemic and the resulting stay-at-home orders and the pivot to remote work has had a profound impact on many aspects of how we live and work. Face-to-face meetings are simply not practical in the age of COVID-19, and that's where Zoom comes in.
The company provides cloud-based video conferencing services that have become virtually indispensable for both business and personal meetings alike. This afforded many companies the option of "business as usual," at least as much as that's possible in the midst of a pandemic, while helping families and friends keep in touch.
Zoom was already on a roll. For the fiscal year ended Jan. 31, the company generated revenue of $623 million, racking up growth of 88% compared to the prior year, and was already profitable -- an anomaly among young, fast-growing companies -- with earnings per share (EPS) of $0.09. But consider Zoom's track record since the coronavirus emerged.
For the first quarter, Zoom reported revenue of $328 million, soaring 169% year over year, while its EPS of $0.09 was as much as all of the prior year combined. Its client base rocketed higher, with customers with more than 10 employees increasing 354%, while those that contributed more than $100,000 in trailing 12-month revenue increased 90%.
Given that Zoom offers a free service with limitations, many believed there was simply no way the company could continue its parabolic growth. They were wrong.
In the second quarter, revenue more than doubled sequentially, climbing to $664 million, up 355% year over year, while EPS soared more than 30-fold to $0.63. At the same time, customers with more than 10 employees increased 458%, while those that contributed more than $100,000 in trailing 12-month revenue increased 112%.
It wasn't just new customers that filled the company's coffers. Zoom's trailing 12-month net-dollar expansion rate stayed above 130% for the ninth consecutive quarter, which illustrates that existing customers are spending 30% more, on average, than they did last year.
The breadth of Zoom's use during the pandemic has made the company's name synonymous with videoconferencing and has become a verb in the process: "Let's Zoom."
It doesn't stop there. Zoom is expanding its services, offering a hardware-as-a-service component that will be available for both Zoom Rooms and Zoom Phone. Zoom Home is also expanding and will be available on a growing number of smart displays ,including Amazon's (NASDAQ: AMZN) Echo Show and Facebook's (NASDAQ: FB) Portal, among others. The company's Zoom Phone cloud-based service is expanding to 25 new countries, bringing the total to 40.
Zoom has become a household name, and given its accelerating financial results and large and growing opportunity, I think it has a much greater opportunity to enrich shareholders than Tesla.
An e-commerce winner
Chris Neiger (Square): There are plenty of ways for investors to play the e-commerce angle, and one huge opportunity is through the payment-solutions company, Square. You've probably seen Square's white payment terminals at restaurants and shops, but the company also has digital payment solutions, and its popular Cash App makes exchanging money between people easier than ever.
The company's digital solutions have become especially important right now as COVID-19 forced people out of retail stores and restaurants and into their homes. An increase in e-commerce sales over the past few months helped drive Square's net revenue up 64% in the most recent quarter. Additionally, the company's Square Cash sales spiked 140% in the quarter, excluding sales of bitcoin.
Square isn't satisfied with just its payment-solutions services, though. The company also has its Square Capital service, which lends money to businesses. This service helps Square round out its financial ecosystem as it provides something for everyone, from small businesses to consumers making peer-to-peer payments.
Square's share price has shot up 132% this year, but that doesn't mean the company won't continue delivering for investors. The e-commerce market, despite its recent growth, is still just getting started. Online retail sales make up just 16% of all U.S. retail sales right now, and as that percentage grows, Square's payment solutions are likely to expand right along with it.
But Square is more than just a fast-growing tech stock. The company has already proved that its business can thrive during tough economic times and continue tapping into the vast U.S. e-commerce market at the same time. And with the e-commerce market expected to be worth $476 billion by 2024, Square has a lot more room to continue benefiting as consumers shift their habits to online purchases.