Strong revenue growth is often an indicator of a high-quality business, especially if it's sustained over a long period of time. Many of the best-performing stocks have that trait in common. And few companies are growing their top lines more quickly than CrowdStrike Holdings (CRWD -3.90%) and Snowflake (SNOW -1.99%).
Between fiscal 2022 and fiscal 2024 (ends Jan. 31, 2024), CrowdStrike and Snowflake are expected to see revenues soar 110% and 158%, respectively, according to Wall Street's consensus estimates. Better yet, these two stocks are backed by solid investment theses, and now looks like a good time to buy.
Here's why.
1. CrowdStrike
Cybersecurity specialist CrowdStrike is flourishing thanks to the unique architecture of its cloud platform. Many vendors burden endpoint devices by installing multiple software products, and those products often result in downtime due to required reboots. But CrowdStrike delivers 22 different software modules through a single lightweight agent that can be installed without a reboot. That makes adoption frictionless.
Additionally, CrowdStrike's platform captures trillions of security signals each week, helping its artificial intelligence engine predict and prevent even the most sophisticated attacks. In fact, as the market leader in endpoint security, CrowdStrike has more data than other vendors, which theoretically makes its AI models uniquely effective. That edge has propelled the company to the forefront of other cybersecurity verticals, including digital threat intelligence and incident response services.
Building on that momentum, CrowdStrike has delivered impressive growth on a consistent basis. Revenue skyrocketed 64% to $1.6 billion over the past year, and free cash flow climbed 49% to $481 million. Even so, CrowdStrike has hardly scratched the surface of its $58 billion market opportunity -- but investors have good reason to believe the company will continue to grow at a rapid clip.
CrowdStrike has a track record of strong execution and rapid innovation. It recently introduced the industry's first fully managed identity threat protection solution, meaning organizations that lack the time or talent can outsource identity protection to CrowdStrike's team of experts. That product enhances its already-robust suite of managed services, including endpoint security and cloud workload protection. More broadly, that type of innovation should keep CrowdStrike ahead of the competition. That's why this growth stock is a buy.
2. Snowflake
Snowflake helps organizations make sense of big data. Its cloud platform (known as the Data Cloud) supports workloads like data ingestion, storage, and analytics, as well as more sophisticated use cases like application development and data sharing. The Snowflake Data Marketplace even makes it possible for organizations to buy and sell data sets.
Beyond that broad functionality, Snowflake benefits from its targeted approach to customer acquisition. The company offers industry-specific versions of its platform tailored to end markets like financial services, healthcare, and retail. That strategy has helped Snowflake win big customers like Mastercard, McKesson, and PepsiCo.
In the past year, Snowflake saw its customer base grow 40%, and the average customer spent 74% more, evidencing its ability to form sticky relationships. In turn, revenue soared 98% to $1.4 billion, and the company generated a positive free cash flow of $227 million, up from a loss of $75 million in the prior year. But management sees a $90 billion addressable market, meaning Snowflake still has a lot of room to grow.
Last summer the company launched Powered by Snowflake, a program that helps customers build and operate applications in the Snowflake Data Cloud. Over 425 organizations had joined the program as of fiscal Q1 2023 (ended April 30, 2022), up 48% from the previous quarter. That rapid adoption highlights the value Snowflake creates for its clients.
More broadly, Snowflake benefits from a powerful network effect. The more customers adopt the Data Cloud, the more data can be exchanged on the platform, creating incremental value for every user. That virtuous cycle should keep Snowflake growing for the foreseeable future. In fact, management believes product revenue will hit $10 billion by fiscal 2029 (ends Jan. 31, 2029), representing sevenfold growth in less than seven years. That's why this stock is worth buying today.
