Economic uncertainty sent the Nasdaq Composite tumbling into a bear market last year, and the tech-heavy index is still down 30% from its high. Unfortunately, there is no telling when the stock market will rebound -- but it has always rebounded in the past, and there is no reason to think this time will be different. That means the next bull market is already on its way.
In the meantime, must-own stocks like The Trade Desk (TTD +0.32%) and Zscaler (ZS +0.14%) are trading at bargain prices. Both should benefit once the bool market returns. Here's what investors should know about these two buy-now-and-hold-forever stocks.
NASDAQ: TTD
Key Data Points
1. The Trade Desk: The leading independent demand-side platform
The Trade Desk is an ad tech company. Its demand-side platform (DSP) helps marketers plan, measure, and optimize data-driven campaigns across digital channels. At the heart of its DSP is a bid-factor-based system that improves campaign performance by enabling users to set precise targeting parameters with just a few clicks. Bid factors are unique to The Trade Desk.
The company also benefits from its independent business model. The Trade Desk does not own any web properties, so it has no reason to steer marketers toward any specific ad inventory. That removes the conflict of interest inherent to "walled gardens" like Alphabet, a business with a clear incentive to push marketers toward Google Search and YouTube.
Collectively, The Trade Desk's unique platform architecture and transparency helped it become the leading independent DSP, and that scale affords the company another advantage. Its platform uses machine learning -- a type of artificial intelligence (AI) that improves with more data -- to drive clicks and conversions for marketers, and each data point makes its AI engine a little more effective.
Many advertisers struggled in the current economic climate, but The Trade Desk displayed an incredible level of resilience. Third-quarter revenue climbed 31% year over year to $395 million and non-GAAP earnings jumped 44% to $0.26 per diluted share. CEO Jeff Green summarized those impressive results by saying The Trade Desk gained more market share during the third quarter than at any point in its history.
Looking ahead, investors should expect that momentum to continue. The Trade Desk is a bastion of transparency in an industry dominated by walled gardens like Alphabet and Meta Platforms, and global digital ad spending is expected to increase at 9.2% annually to reach $1.3 trillion by 2030, according to Precedence Research. That means The Trade Desk is well positioned to capitalize on a large and growing market.
Currently, shares trade at 14.1 times sales, a bargain compared to the three-year average of 40.5 times sales. At that price, this growth stock is a must-buy for long-term investors.
NASDAQ: ZS
Key Data Points
2. Zscaler: The leading network security cloud
Zscaler runs the largest network security cloud in the world. Its security service edge (SSE) platform modernizes traditional corporate networks by handling content inspection and policy enforcement in the cloud. That eliminates the need for costly on-premise security appliances, and it allows users to quickly and securely access corporate resources regardless of device or location.
Zscaler handles over 250 billion requests each day, capturing more than 300 trillion security signals in the process, and every data point makes its AI engine better at detecting threats. As the largest network security cloud in the world, Zscaler can deliver better threat protection than other vendors, and that advantage has made it the gold standard among SSE vendors. In fact, research company Gartner has recognized Zscaler as a leader for 11 consecutive years.
That recognition came alongside strong demand. Today, 40% of the Fortune 500 uses at least one Zscaler product, and the company kept its net retention rate above 125% for eight consecutive quarters, meaning the average spending per customer is rising by about 25% each year. Fueled by that momentum, revenue rose 54% to $356 million in the most recent quarter, and cash from operations increased 39% to $129 million.
Turning to the future, shareholders have good reason to be optimistic. Zscaler supplements its core user protection products with solutions for cloud workload protection and digital experience monitoring. That brings its current addressable market to $72 billion, but management says the long-term opportunity is even bigger, citing room to expand with commercial organizations and Internet of Things devices.
Also noteworthy, Gartner estimates that enterprise penetration of SSE platforms will reach 80% by 2025, up substantially from 20% in 2021. That means implementing zero-trust network security is a key priority for many organizations, and that trend plays right into Zscaler's strength.
Currently, shares trade at 12.1 times sales, a bargain compared to the three-year average of 36.9 times sales. That creates a phenomenal buying opportunity for investors.
