Right now, market turbulence is very much in focus -- and it's been hitting growth-focused investors particularly hard. But take a moment to zoom out and look at the bigger picture.
The S&P 500 index delivered a total return of roughly 222% over the last decade, and the even more tech-heavy Nasdaq Composite index rose more than 278% across the same stretch. While macroeconomic challenges are currently shaping investor sentiment, top tech stocks remain a compelling vehicle for long-term wealth creation. Read on to see why taking a buy-and-hold approach to these growth stocks would be a great move on the heels of recent share-price pullbacks.
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1. Snowflake
Snowflake's (SNOW -1.61%) Data Cloud platform makes it possible to combine, analyze, and act on information generated from cloud infrastructure services that would otherwise be walled off from each other. In terms of charting new strategies, carrying out day-to-day operations, and running applications in real time, the ability to access and analyze the full range of data available will only become increasingly important in the future.
The company ended its third quarter with 287 customers generating more than $1 million in revenue over the trailing 12-month period, up from 246 customers in Q2 and 148 in last year's third quarter. Along with a 65% increase in average spending from customers already using its services, new customer additions helped push product revenue up 67% year over year in Q3.
Snowflake's midpoint guidance calls for product revenue of approximately $1.92 billion in its 2023 fiscal year, which closes at the end of this month, representing 68.5% annual growth. Despite facing some macroeconomic headwinds, the business is scaling at an encouraging clip, and there's plenty of room for expansion over the long term.
For its fiscal year ending January 2029, the company still expects to post roughly 30% annual sales growth and reach revenue of approximately $10 billion. The company also anticipates recording a non-GAAP (adjusted) free-cash-flow margin of 25% that year. These targets suggest Snowflake would still likely be recording strong sales growth after the end of this projection period -- and doing so quite profitably.
With the stock trading down roughly 69% from its high, Snowflake is a worthwhile consideration for growth-focused investors seeking a stock capable of delivering big long-term wins.
2. CrowdStrike
Cyber criminals have many avenues they can use for attacks. By exploiting weaknesses in computers, mobile devices, and other hardware, bad actors can gain access to networks and wreak havoc until they are detected and removed. But CrowdStrike's (CRWD 0.13%) Falcon software platform is helping to prevent endpoint devices from being exploited, and the business has a strong growth outlook as cybersecurity services continue to become increasingly essential.
CrowdStrike added 1,460 net new subscribers in the third quarter, good for growth of 44% year over year and bringing its total customer count in the category to 21,146.
More than 98% of customers using the company's products in the prior-year period were still using its services at the end of the most recent quarter, representing the best retention rate in its class. And the overall customer retention picture is actually much better than that.
CrowdStrike closed out Q3 with a dollar-based net revenue retention rate of 123.9%, which means that customers still using its services increased their spending by 23.9% compared to the prior-year period.
Through the combination of new customer additions and increased spending from those already using its services, CrowdStrike's revenue grew 53% year over year in the quarter to hit $580.9 million, and free cash flow rose 41% to reach $174.1 million.
CrowdStrike is rapidly gaining market share and still has a massive total-addressable-market (TAM) opportunity ahead of it. The company estimates that its TAM will expand from $76 billion to $158 billion in 2026, and the overall size of its addressable market should continue to grow from there.
With the business already posting impressive margins and expanding sales at a rapid clip, CrowdStrike stands out as a great stock for investors looking to benefit from the growing need for high-performance cybersecurity technologies. Trading down roughly 68% from its valuation peak, this category leader looks like a great buy for long-term investors.
