The search for a stock that can multiply in value is always exciting. Everyone hopes to find the next Netflix or Apple, but it's important to realize that these companies are unique in building their competitive edges within their respective industries. These businesses built on their strengths to steadily increase their market shares over the years.
A good place to start looking for all-star stocks is the software and technology sector. These industries offer a great chance of finding tomorrow's winners -- cloud computing has seen demand accelerate due to the pandemic, providing a sustainable catalyst for the adoption of cloud services by a wide swath of businesses. This tailwind should provide many years of growth and allow these businesses to generate the kind of loyalty and customer stickiness that determine long-term success.
Here are two stocks that are poised to ride this wave and should be able to provide massive rewards to investors in the years ahead.
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1. Snowflake
Snowflake (SNOW -1.00%) offers its clients a data cloud platform to better manage voluminous amounts of data to enable quicker processing and more insightful analytics. Its software is platform-agnostic and allows for data sharing across a myriad of applications, thereby increasing its attractiveness. The $48 billion business has seen its share price more than halved year-to-date, but its business model has the potential to deliver strong growth ahead.
The company has witnessed a sharp surge in demand, reporting a more than doubling of its revenue to $$1.2 billion for its fiscal 2022. The momentum has carried over into the first quarter of fiscal 2023, with revenue soaring by 85% year over year to $422 million. Customer remaining performance obligations (RPO) nearly doubled year over year from $1.4 billion to $2.6 billion. On the customer front, Snowflake saw its total customer base rise 40% year over year to 6,322 for the first quarter of 2023, while the number of customers providing more than $1 million in product revenue nearly doubled to 206. The company also reported an impressive dollar-based net retention rate (DBNRR) of 174%.
At Snowflake's recent Investor Day, the company highlighted a total addressable market of $248 billion for the cloud data platform market. This number demonstrates the potential for the business to grow strongly as it helps its clients expand use cases for its software. During its annual user conference, the company also launched Unistore, an initiative that expands its software capabilities to help streamline and simplify transactional applications for clients. These moves to enhance its software offering and uncover additional use cases for its clients should stand Snowflake in good stead to attract more clients.
2. Asana
Asana (ASAN 1.25%) provides a customizable workplace management dashboard to help companies' teams streamline communication and workflow. The $4 billion company assists its clients with project management to improve the efficiency of their business processes, thus relieving a crucial pain point for many organizations. Asana boasts more than 126,000 customers in 190 countries and is growing rapidly, with fiscal 2022's (ended Jan. 31, 2022) revenue jumping 66.7% to $378.4 million.
Asana's sales have continued their run in the first quarter of 2023, growing by 57% year over year to $120.6 million. Customers are also spending more with the company. The number of customers spending $5,000 or more on an annualized basis in Q1 grew by 48% year over year to 16,689, while those spending $50,000 or more doubled to 979. Overall DBNRR stood high at 120% for the quarter, and Asana expects 2023's revenue growth to be between 42% and 43%.
The company believes that there is still a large underserved market, with around 1.1 billion workers by next year. Of this, Asana has around 2 million paid users as of Oct 31, 2021, with a less than 5% user penetration rate, leaving room for significant growth. The market for project management software is estimated to be at $50.7 billion by 2025, and Asana has plenty of room to increase its top line along with other players in the market. The company recently signed on with Align Technology as a client, helping it to track patients' treatment journeys while organizing and managing consultations, prescriptions, and appointments. Asana has ambitious plans to add more customers, increase use cases, and improve its software, making it a great candidate for outsized growth in the years ahead.
