Rising inflation and the threat of higher interest rates have crushed many of the market's favorite growth stocks over the past few months. That sell-off wasn't surprising, but plenty of babies were also tossed out with the bathwater.
Today, I'll highlight four high-growth tech stocks I personally own that are still worth accumulating even as the market shuns the entire cohort.
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1. CrowdStrike: The cybersecurity play
CrowdStrike's (CRWD 3.63%) cloud-native cybersecurity platform eliminates the need for on-site appliances. That disruptive approach locked in 14,687 subscription customers during the company's latest quarter, representing 75% growth from a year earlier.
CrowdStrike's revenue grew 82% to $874 million in fiscal 2021, which ended last February, and it anticipates 63%-64% growth in fiscal 2022. Its customers have been using an increasing number of its cloud-based modules, which supports its "land and expand" strategy, and it's kept its dollar-based net revenue retention rate above 120% ever since its IPO in 2019.
CrowdStrike also turned profitable on an adjusted basis in fiscal 2021, and it expects its adjusted net income to more than double in fiscal 2022. The stock still isn't cheap at nearly 180 times forward earnings and 20 times next year's sales, but its robust growth rates and first-mover's advantage in the cloud-native cybersecurity space could easily justify that premium.
2. C3.a1: The artificial intelligence play
C3.ai (AI 3.52%) develops AI algorithms that can improve the performance of a company's existing software infrastructure. These algorithms can help a company streamline its operations, improve employee safety, and even detect money laundering and illegal transactions. It also provides pre-built AI applications as stand-alone services.
C3.ai's revenue rose 71% in fiscal 2020 but grew just 17% to $183 million in fiscal 2021 (which ended last April) as the pandemic disrupted its orders from large energy and industrial customers. However, C3.ai expects its revenue to rise 35%-36% this year as those pandemic-related headwinds fade away.
C3.ai's stock plunged more than 80% over the past 12 months as investors fretted over its slowing growth, steep losses, customer concentration issues, and its high post-IPO valuations. The company remains unprofitable, but its growth is stabilizing, it's securing new deals to diversify its customer base, and it no longer seems overvalued at eight times next year's sales. C3.ai is still a speculative stock -- but it looks very attractive relative to its growth potential.
3. Magnite: The advertising play
Magnite (MGNI 1.73%), which was formed by the merger of two smaller ad tech companies in 2020, is the world's largest independent sell-side platform (SSP) for digital ads. SSPs help publishers and digital media owners manage and sell their own ad inventories.
Magnite is a major player in the connected TV (CTV) advertising market. It expanded its CTV business with its acquisitions of SpotX and SpringServe last year, and it expects to control more than 30% of the CTV advertising market -- compared to 20%-25% today -- within the next "five-plus" years. It also expects the entire CTV advertising market to grow five times larger.
Magnite management believes those secular tailwinds will enable the company to generate over 25% annual revenue growth with an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 35%-40% over the next few years. That's a solid growth rate for a stock that trades at just 15 times forward earnings and three times next year's sales.
4. MercadoLibre: The e-commerce play
MercadoLibre (MELI 1.96%), the top e-commerce player in Latin America, lost more than 20% of its value over the past three months as investors fretted over its decelerating growth in a post-lockdown market, the competitive headwinds, its declining margins, and a big secondary offering last November.
Those concerns are all valid, but MercadoLibre is still growing like a weed. Its revenue rose 73% to $3.97 billion in 2020, and analysts expect its revenue to grow another 74% in 2021 and 36% in 2022. It ended its latest quarter with 78.7 million unique active users.
That only represents a small percentage of the underpenetrated Latin American e-commerce market, and MercadoLibre could still have plenty of room to grow as the region's e-commerce and digital payments leader. Analysts expect it to generate a full-year profit in 2021, followed by 157% earnings growth in 2022.
MercadoLibre might not initially seem cheap at 111 times forward earnings, but it also trades at just six times next year's sales. That low price-to-sales ratio could quickly lure back growth-oriented investors in the near future.
