Even before the pandemic, the world was becoming more and more digitized. New innovations such as cloud computing, artificial intelligence, and 5G communications are opening up new ways to work and interact with customers, and the COVID-19 global pandemic only accelerated these powerful trends.
Yet with the economy reopening and concerns over higher interest rates, which some think will harm growth stocks, high-growth tech stocks have fallen out of favor in recent months, despite very strong results.
For long-term investors, that may have opened up a great buying opportunity in stocks that are performing terrifically on a fundamental basis. That's why Amazon.com (AMZN -1.11%), CrowdStrike (CRWD -1.82%), and Alteryx (AYX) all make great buys today.
Amazon should excel even post-pandemic. Image source: Getty Images.
Amazon: More than just a COVID stock
Despite stellar recent earnings, Amazon's stock has stagnated over the past nine months after skyrocketing in the early months of COVID. Investors may be getting nervous about having customers venture away from e-commerce as stores reopen, as well as very difficult comparisons to a blockbuster 2020. Furthermore, founder Jeff Bezos announced earlier this year that he would be stepping away from the CEO role, while staying on as chairman and ceding day-to-day leadership to Amazon Web Services CEO Andy Jassy.
To sell Amazon on these concerns is pretty short-sighted, however. First, e-commerce isn't exactly going away, and Amazon has racked up millions of new Prime members during the pandemic. New types of customers such as seniors are using Amazon for the first time, and international markets that may have been resistant to e-commerce before now seem to be embracing Amazon. Although many had thought Amazon Prime membership had hit a saturation point in recent years, Amazon just disclosed more than 200 million paying Prime members worldwide, up from over 150 million Prime members reported just before the pandemic.
History has shown that Amazon Prime members become hooked on the service and tend to spend more often and in much higher volumes once they become Prime members. So with Amazon now reaching 33% more people with Prime offerings, I wouldn't expect results to fall off a cliff.
In the recent quarter, Amazon posted very strong results, with revenue up 44% and operating income up almost 125%. Notably, international revenue, which had long grown at a slower pace than the U.S., accelerated 50%. In addition, Amazon's highest-margin business -- AWS, third-party sellers, and advertising, which makes up most of the "other" category -- all accelerated over the prior quarter, with AWS up 32%, third-party sellers up 60%, and other revenue up a whopping 73%, respectively, in constant currency.
Though Amazon is beginning to lap tough comparisons from 2020, it is still forecasting between 24% and 30% growth in the second quarter. And shareholders should benefit from brand-new initiatives such as checkout-less technology, shipping of third-party packages with its own fleet, and new healthcare initiatives in online pharmacy and telehealth.
After a long period of consolidation, now may be a good time to add to a long-term stake in the e-commerce giant.
CrowdStrike dominates the endpoint protection market. Image source: Getty Images.
CrowdStrike Holdings is a cybersecurity category-killer down 30%
After surging 324% in 2020, cybersecurity disruptor CrowdStrike Holdings has fallen some 27% from recent all-time highs.
However, the only thing that has really changed with CrowdStrike is the stock price. Its operating results have remained terrific, as they have been since CrowdStrike went public in mid-2019. Last quarter, revenue surged 74%, with subscription revenue up 77% and gross margins expanding 300 basis points to 80%. CrowdStrike also guided for just over 50% growth this year, as customers continue to adopt CrowdStrike's novel AI-based solutions. Given that CrowdStrike tends to easily beat its guidance, it should be yet another strong year ahead for the company.
After the enormous SolarWinds (SWI 3.40%) hack last year, SolarWinds adopted CrowdStrike's endpoint protection solutions, which is a pretty good vote of confidence that CrowdStrike has the leading offering in that cybersecurity segment. Deploying its lightweight Falcon agent to every corporate endpoint, all CrowdStrike customers feed data back to its centralized Threat Graph, which uses AI to hone its algorithms to keep ahead of the latest attacks. So, the solution benefits from powerful network effects, improving its effectiveness with more customers, which in turn draws in more customers, and so on.
CrowdStrike still isn't cheap, with the stock trading at about 32 times this year's sales. However, it appears CrowdStrike's technology gives it a competitive moat that should last for a while. While it's impossible to exactly call bottoms, it's probably not a bad idea to pick up a growth category winner down nearly 30%.
Alteryx data analytics software is finding favor among large businesses. Image source: Getty Images.
Alteryx: C-suite transition creates opportunity in data analytics
Finally, if you think CrowdStrike could be a deal down 27%, consider data analytics company Alteryx a massive bargain, down almost 60% from its all-time highs set about one year ago.
Alteryx is down for a couple of reasons -- one of which is the interest rate concern affecting all software-as-a-service stocks in 2021. However, the company also has some tricky accounting characteristics that make it seem it's growing slower than it is. When Alteryx books a contract, it recognizes about 40% of the total contract value up front, and then the rest ratably over the course of the contract. With the big step-down for mature contracts, you can imagine how that can depress top-line growth.
However, the key metric to focus on with Alteryx is annual recurring revenue (ARR), which takes into account the company's recurring subscription revenue adjusting for the accounting convention. So while top-line revenue growth was only 9% last quarter, ARR grew 27%. Furthermore, for 2021, management expects ARR growth of 29%, accelerating through the year.
Driving this revenue growth is new CEO Mark Anderson, who took over the lead role at Alteryx in October after a successful career as president of Palo Alto Networks. Anderson has retooled Alteryx's go-to-market strategy, focusing on expansion within existing large clients and reinvesting in customer success. In other words, Alteryx is forming closer partnerships with its customers, as they get used to using data analytics in new and more relevant ways.
The big data revolution in business isn't slowing down, and Alteryx's automated analytics software is becoming a preferred tool for many large businesses in their decision-making and back-end processes. With a new CEO showing good early results, Alteryx's beaten-down stock, trading at just 10 times annual recurring revenue, could turn around in time.
