Despite a grim outlook for the economy, there are still plenty of companies growing explosively. Contrary to popular belief, large companies can grow rapidly even in a downturn due to their broad revenue streams.
Three such stocks with great long-term potential are Airbnb (ABNB -0.04%), Tesla (TSLA -0.13%), and CrowdStrike (CRWD -1.22%). This trio spans multiple economic sectors and gives investors solid diversification into a broader portfolio. Here's why you should consider buying these stocks right now.
Airbnb
When a company name becomes a verb or synonymous with an industry, it displays massive brand power. For example, Airbnb has become synonymous with staying at privately owned residences, and the company has maintained its market leader position over other companies copying its business model.
Airbnb is growing strongly now because of the pandemic-induced travel reduction in the past couple of years, but it's also growing rapidly compared to three years ago. In the first quarter, Airbnb's revenue grew 70% year over the year-ago period and 80% from three years ago. For Q2, management expects $2.08 billion in revenue, indicating a growth of 56% from a year ago and 71% from three years ago.
These are solid results and projections, but investors may wonder: Won't consumers cut travel spending in a recession? Management isn't worried -- Airbnb's CFO believes consumers can find better values when traveling using Airbnb versus standard hotels, making it the go-to option for traveling on a budget.
Time will tell if this thinking pans out, but logically and from personal experience, I tend to agree with this assessment. As more travelers utilize Airbnb and its experience offering takes off, the company should continue to exhibit explosive growth. With the stock down more than 50% from its all-time high, I think Airbnb represents a substantial value here.
Tesla
Few stocks are more polarizing than Tesla. Its high valuation for an automaker, unconventional CEO, and participation in the still-nascent electric vehicle (EV) industry make it a fascinating stock to watch.
But I also think it's a great one to own. The worldwide EV leader produced 258,580 vehicles in Q2, up 25% year over year despite supply chain issues and COVID lockdowns affecting its factories. And its revenue was up 43%, primarily due to higher vehicle prices.
Tesla's operating margins, which were an astounding 19.2% during Q1, dropped to 14.6% in Q2. Because factories were not running at full capacity, it makes sense that this number is lower than in Q1, but still higher than 2021's Q2 level of 11%. Still, Tesla's price-to-earnings ratio sits at a hefty 91.
Tesla is still valued highly, but its consistent growth and respectable profitability ease my concerns. If Tesla can deliver on its 50% annual growth in vehicle delivery over a multi-year horizon projection, it may earn its price tag.
Even with legacy automakers beginning large-scale EV production, I'm not concerned. In Consumer Reports' 2021 Most Satisfying Cars Report, Tesla's four production models ranked in the top 10 and took three of the top four spots, including first place. Legacy automakers don't offer consumers as great of a product as Tesla, so it won't be easy to take away Tesla's leadership position in the EV space.
EVs aren't going away, and with Tesla's market leadership, I think it's an explosive stock to buy.
CrowdStrike
Explosive tech companies are everywhere, but one stands out above the rest to me. CrowdStrike offers a cloud-based platform that helps secure network endpoints like laptops and phones. With cyberattacks expected to rise, companies must invest to keep their data safe. CrowdStrike offers an incredible value to its customers. Third-party Forrester Research found that the average return on investment over three years has been 403% when deploying CrowdStrike's cybersecurity solution.
CrowdStrike's financial results are just as impressive as its value, with its annual recurring revenue (ARR) rising 61% year over year to $1.92 billion in its fiscal 2023 first quarter (ended April, 30). It's also free-cash-flow positive, posting an impressive 32% margin during the quarter.
By January 31, 2026, CrowdStrike expects its ARR to expand significantly to more than $5 billion, driven by sales of its security modules to new customers. CrowdStrike has over 20 modules with different cybersecurity functions, and each additional one it sells to its customers increases recurring revenue. CrowdStrike has masterfully "upsold" its customers over the past year, and the chart below displays its success.
Image source: CrowdSrtike.
With CrowdStrike releasing more modules each quarter, this should drive the company's rapid growth. CrowdStrike trades at a hefty 84 times free cash flow, but this valuation reflects the company's early stages and massive market opportunity.
I'm a buyer of CrowdStrike's stock, and while I don't know what the market will do over the next couple of months, I'm confident CrowdStrike's stock will be a market beater over the next three to five years.
