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2 Smart Growth Stocks to Buy Right Now

By Trevor Jennewine – Aug 26, 2021 at 6:47AM

Key Points

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These cybersecurity companies should benefit as enterprises bolster their defenses.

Cybercrime continues to occur with alarming frequency. So far this year, high-profile attacks on the Colonial Pipeline, McDonald's, and Microsoft have made headlines, and T-Mobile recently joined those ranks when hackers stole the personal information of 54 million people. These attacks damage a company's reputation and often harm its customers' wellbeing, inflicting a heavy toll on the economy.

In fact, cybercrime will cost the world $6 trillion this year, according to Cybersecurity Ventures. And that figure is expected to reach $10.5 trillion by 2025. With that in mind, now looks like a good time to invest in CrowdStrike Holdings (CRWD -3.80%) and Okta (OKTA -0.08%). Here's what you should know about these growth stocks.

Investor reviewing various charts and financial metrics.

Image source: Getty Images.

1. CrowdStrike Holdings

CrowdStrike specializes in endpoint protection. Its cloud-based Falcon platform helps clients secure workloads and devices (e.g. applications, servers) across private data centers, public clouds, and virtualized environments. In all cases, CrowdStrike uses artificial intelligence and behavioral techniques to achieve industry-leading threat detection, enabling its Falcon platform to block even the most sophisticated attacks.

Case in point: Earlier this year, CrowdStrike achieved a 100% protection rate in the AV Comparatives industry benchmark, and it was awarded the highest rating by independent testing organization SE Labs. Likewise, Forrester Research recently recognized CrowdStrike as the leader in endpoint security, citing its strong threat protection and threat hunting capabilities.

These examples represent a small fraction of the company's total accolades, all of which boil down to this: CrowdStrike has become a gold standard in cybersecurity. And in 2020, the company captured more market share than any other vendor in the endpoint protection space.

Not surprisingly, CrowdStrike's business is growing like wildfire.

Metric

Q1 2020 (TTM)

Q1 2022 (TTM)

CAGR

Customers

3,059

11,420

93%

Revenue

$298.6 million

$999.2 million

83%

Data source: CrowdStrike SEC filings, Ycharts. TTM = trailing-12-months. CAGR = compound annual growth rates. Note: Q1 2022 ended April 30, 2021.

Since its IPO in 2019, CrowdStrike has expanded its offering from 10 to 19 modules. To that end, the company recently acquired identity provider Preempt Security and log management specialist Humio, both of which added new functionality to the Falcon platform. CrowdStrike also launched Falcon X Recon to help clients monitor threats on the deep and dark web, and Falcon Horizon to automate aspects of cloud security.

Collectively, these new solutions make the Falcon platform a more comprehensive solution. And they've also helped CrowdStrike grow its addressable market, which currently sits at $36 billion, though management believes that figure will reach $106 billion by 2025. That's why you should consider adding this growth stock to your portfolio.

2. Okta

Okta specializes in identity and access management (IAM). This branch of cybersecurity is critical to a zero trust framework, a model in which no user is trusted by default. Specifically, the Okta Identity Cloud allows enterprises to enforce contextual access policies based on user, device, location, or even typing cadence.

More importantly, Okta provides both workforce and customer identity solutions, allowing clients to securely connect the right people to the right applications and services. Collectively, management values these markets at $80 billion. And Okta has executed on that opportunity, delivering strong financial results over the last two years.

Metric

Q1 2020 (TTM)

Q1 2022 (TTM)

CAGR

Customers

6,550

10,650

28%

Revenue

$440.9 million

$903.6 million

43%

Data source: Okta SEC filings, Ycharts . TTM = trailing-12-months. CAGR = compound annual growth rate. Note: Q1 2022 ended April 30, 2021.

So what's driving this growth? Okta leans on big data and artificial intelligence to automate and improve security. This creates a powerful flywheel: As Okta adds new clients, more data is fed through its AI engine, enhancing its ability to assess risk. And as new threats are detected, Okta's platform becomes more intelligent, enhancing the value to clients.

This virtuous cycle has helped Okta scale its business quickly, and it now boasts far more customers than rivals like Ping Identity. At the same time, this dynamic has helped Okta build an extensive partner ecosystem, which currently offers over 7,000 pre-built integrations, providing clients with ready-made access to platforms like Microsoft 365 and Salesforce.

Here's the bottom line: As enterprises undergo digital transformation, cybersecurity should become increasingly important. To that end, Okta has established itself as a strong competitor in the IAM market. That's why this growth stock looks like a smart buy.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Trevor Jennewine owns shares of CrowdStrike Holdings, Inc. and Okta. The Motley Fool owns shares of and recommends CrowdStrike Holdings, Inc., Microsoft, Okta, Ping Identity Holding Corp, and Salesforce.com. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.

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