As investors, maintaining a long-term focus is never more important than when the stock market is in decline. High-quality companies are often swept up in broad-based selling, even if their underlying businesses are firing on all cylinders.
That's certainly the case for the two technology companies I'm about to share. Both of them have raised their financial forecasts throughout 2022, while much of the tech sector has slashed its guidance amid the weakening economic environment.
The stocks are down 61% and 75% from their all-time highs, but there are some early signs that an improvement in economic conditions could be on the horizon. So with 2023 around the corner, this might be a great buying opportunity.
Datadog just increased its sales forecast for a third time
2022 is almost over, and Datadog (DDOG -1.32%) is set to end the year on a high. The company just reported its financial results for the third quarter (ended Sept. 30), and they were so strong that it raised its full-year revenue forecast yet again.
Datadog is cementing its position as an essential tool for cloud monitoring. What does that mean? Businesses are increasingly reliant on cloud computing technology to run their operations and to drive their touch points with customers. In other words, they're moving these things online.
In the physical world, gaining a sense for customers' satisfaction might be as simple as assessing their attitude toward their experience in-store, but that's a little more complicated in the digital world where consumers are faceless. Datadog's platform helps businesses ensure their digital sales channels are operating at peak performance for all customers, and rapidly alerts them to technical issues before they might lead to poor experiences or dissatisfaction. It can serve a broad range of industries, too, from retail to financial services.
Over the first nine months of 2022, Datadog's revenue surged by more than 71% compared to the same period last year, to $1.2 billion. Its full-year revenue guidance has increased by over $100 million since the beginning of 2022, bucking the widespread slowdown in the tech sector. The company is also very close to profitability, with a net loss of just $21 million year to date. That should give investors some comfort, because despite investing heavily in growth, its bottom line is still moving in the right direction.
The disparity between the strong performance of Datadog's business and its stock price, which is down 61% from its all-time high, could spell opportunity for investors. For that reason, it might be worth buying here ahead of 2023.
Confluent is a streaming powerhouse of a different kind
When it comes to streaming, most people think of television shows, movies, or music. The technology has given us access to content on demand, and in real time. But Confluent (CFLT -0.53%) streams data, and while that sounds less entertaining, the company works tirelessly in the background to make your online experiences are seamless.
For example, data streaming is at the heart of Walmart's operations. The retail giant has a real-time replenishment system powered by the technology, which ingests 500 million events per day from 1 million online transactions. What does that mean? Inventory for every product Walmart carries is monitored and updated in real time across every sales channel, so it never runs out of stock. Every time you find what you need in-store or online at Walmart, you likely have data streaming to thank.
Similarly, but more directly, consider a sports betting application. Each time a punter places a bet during a live game, data streaming is the mechanism that allows real-time odds to be rapidly calculated and fed onto their screen.
With the onset of cloud computing, this technology is becoming more commonplace. Consumers constantly demand faster digital experiences and Confluent is the ultimate facilitator, because it harnesses the Apache Kafka data streaming software that is used by 80% of the Fortune 100 companies.
The company has a rapidly growing pipeline of work, with $663.5 million in remaining performance obligations as of the third quarter. That number was up 72% year over year, and it's a key metric to watch because it typically converts into revenue over time. Speaking of revenue, Confluent has generated $417 million in the first nine months of 2022 and, like Datadog, it has regularly increased its full-year guidance.
The company serves 921 customers that spend at least $100,000 annually, and the number continues to grow with each passing quarter. Confluent stock has declined by 75% from its all-time high, but the demand for data streaming is only going to trend in one direction in the years to come. Given the company's strong results, this is a great opportunity going into 2023.
