- NVIDIA has experienced significant sales and earnings growth this year and should continue its diversification through its purchase of Arm Holdings.
- Shopify is thriving as it helps businesses transition to e-commerce, and the company has lots of room to grow as online sales increase in the U.S.
- HubSpot's online tools have helped many businesses ride out the pandemic, and the company has managed to grow sales despite tough economic times.
There are plenty of great companies that are growing rapidly right now, despite the current pandemic and recession.
If you're looking for high-growth tech stocks that are not only growing right now, but also have plenty of room left to keep leading for years to come, check out NVIDIA (NASDAQ:NVDA), Shopify (NYSE:SHOP), and HubSpot (NYSE:HUBS). Here's why.
NVIDIA's core business is designing graphics processing units (GPUs). The company focused on using these chips in the gaming market for years. More recently, NVIDIA has expanded their use into other markets, including artificial intelligence.
NVIDIA has grown rapidly this year, with sales climbing 57% in the most recent quarter and non-GAAP diluted earnings per share jumping 63% -- both of which outpaced analysts' expectations. The company put up similarly impressive numbers in the second quarter, as sales increased 50% year over year and non-GAAP diluted EPS popped 76%.
As impressive as this growth has been, NVIDIA's management isn't satisfied with kicking back and relaxing. The company is in the process of purchasing Arm Holdings. NVIDIA CEO Jensen Huang says the deal "will create a company fabulously positioned for the age of AI," as it combines NVIDIA's artificial intelligence platform with Arm's CPU designs.
NVIDIA says the purchase of Arm, which is expected to close in the first quarter of calendar 2022, will be immediately accretive to its non-GAAP gross margin and earnings per share.
The tech giant has also wisely diversified its revenue streams over the past few years. It used to be heavily reliant on the gaming market, but now its data center revenue is slightly larger than gaming sales. This demonstrates that NVIDIA is still capable of finding new ways to grow.
Shopify is betting on the rise of e-commerce by creating a platform for businesses of all sizes to set up and run online shops. The e-commerce market has been expanding for years, and that growth accelerated during the pandemic. As a result, Shopify's sales spiked 96% in the most recent quarter, and the amount spent on its platform (gross merchandise volume) jumped 109%.
Shopify has been in a unique position this year to help other businesses stay afloat as lockdowns and social distancing closed down many brick-and-mortar retail locations. Many of those businesses pivoted to online sales, and Shopify's platform helped some of them make that transition.
Some investors may think that because Shopify has grown so quickly during the pandemic, it may not make a great investment once the U.S. returns to normal. But that logic misses the bigger e-commerce picture. At the beginning of 2020, e-commerce accounted for under 12% of total U.S. retail sales, up from just 7.5% three years earlier. Not only does this show the rapid growth of e-commerce in just a few years, but it also shows that there's still plenty of room for this market to continue expanding.
Shopify has proved that it can weather a tough retail environment and still thrive. It's likely that even when the U.S. retail market returns to normal (relatively speaking), many businesses will continue their online presence. With Shopify already being one of the go-to platforms for companies to set up online shops, the company is perfectly poised to benefit as e-commerce expands.
Don't worry if you've never heard of HubSpot before. Unless you're a business owner who needs to manage current customers or find new ones, you probably don't need HubSpot's services. The important thing for investors to know is that the company's inbound marketing and relationship management tools help businesses keep and attract customers.
HubSpot is thriving. The company's subscription revenue climbed 32% in the third quarter, and its total customer count spiked 39%. Sales and earnings both beat Wall Street's expectations, and management estimates that full-year 2020 revenue will rise about 28% compared to last year.
This growth has come during an especially difficult economic year for HubSpot's customers. Even more impressively, HubSpot actually cut the prices of some of its products and upgraded some of its customers to premium services for free to help them survive during the pandemic.
Like Shopify, don't expect HubSpot to fizzle after the pandemic is over. HubSpot has likely forged long-term customer loyalty after putting customer relationships above its bottom line. That could pay off for the company for years to come.
This only works if you have a long-term view
HubSpot, Shopify, and NVIDIA should make great investments over the coming years. But it's important to remember to not let short-term gains or losses dictate whether or not you hold onto these investments. The best way to build wealth is to buy shares of great companies and hold onto them for years, not months.