It's no secret that growth stocks have taken it on the chin over the last year. The bellwether Nasdaq Composite fell by 33% in 2022, marking one of its worst performances since the Global Financial Crisis back in 2009. Economic growth is slowing because of a potent mix of high inflation, weak growth, and surging interest rates.
These problems may loom large now, but when put in perspective, are just blips in the long run as markets and economies always eventually recover. The good news is that there are businesses still displaying solid growth even with these headwinds, and when the bear market reverses into a bull run, these stocks should enjoy an even stronger boost to their share prices.
Here are two growth stocks you can accumulate that are prime candidates for the next bull run.
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Twilio
Twilio (TWLO -0.17%) has come a long way in helping employees and corporate executives communicate better. The company offers a customer platform as a service (CPaaS), and is ranked the number-one customer data platform by the IDC for 2021.
Twilio has demonstrated strong growth over the past three years, with revenue more than doubling from $1.1 billion in 2019 to $2.8 billion in 2021. For the first nine months of 2022, the company's top line continued its upward momentum, jumping 40.2% year over year to $2.8 billion, already achieving the revenue it chalked up in the entire previous year.
What's more, Twilio has also been building up its customer base, reporting 280,000 active customer accounts for Q3 of 2022 compared to 250,000 a year ago. Although the dollar-based net expansion rate dipped from 131% in the prior year to 122%, it was still above 120% and healthy.
CEO Jeff Lawson also announced the expansion of Twilio's Customer Engagement Platform to enhance both user experience and security with a password-less login. The company partnered with more than 56 mobile operators across 30 countries to enable the identification of customers by verifying their devices and phone numbers, thereby helping to authenticate users without the need for them to memorize passwords.
Growth looks slated to continue, as detailed in Twilio's latest Investor Day presentation. The company believes it can cross-sell its services to increase its top line amid multiple land and expand opportunities. A three-prong approach will be deployed targeting product developers, data analytics and customer experience.
To do so, Twilio will partner with consulting, platform, and technology partners to realize its vision for a strong and reliable customer engagement platform. The market for customer engagement software and messaging continues to grow at 13% per year from 2022 to 2025, with the total addressable market set to hit $116 billion by then.
Twilio may occupy just a tiny slice of this lucrative pie, but that looks set to expand in the years ahead.
Shopify
Budding entrepreneurs tap into Shopify's (SHOP -0.83%) platform to help them easily set up their online businesses.
The e-commerce company saw demand for its services soar at the onset of the pandemic as more people started home businesses amid movement restrictions. Numerous people also began side hustles as a way to diversify their income streams away from their salaried jobs, thereby boosting the number of merchants on Shopify's platform.
Total revenue surged from $1.6 billion at the end of 2019 to $4.6 billion two years later, and the first nine months of 2022 saw Shopify post a near-20% year-over-year jump in revenue.
Although demand is expected to normalize this year, Shopify still has a lot going for it. For one, the company's digital advertising tools tap into its merchant data to provide valuable insights, allowing companies to bypass Apple's new privacy measures. As a result, technology behemoth Alphabet and social media giant Meta Platforms are partnering with Shopify.
In the middle of last year, Shopify also acquired Deliverr Inc for around $2.1 billion to strengthen its fulfillment network and offer two-and-next-day delivery options in the U.S. These moves will no doubt help to boost Shopify's presence and make it a more reliable e-commerce player, helping it to attract more merchants onto its platform.
Shopify is also investing more in building client relationships, simplifying logistics, and going international. It launched Collabs to enable merchants to collaborate and find creators that can help reach a larger audience, and also launched POS Go to simplify the sales process for merchants using just one device. Shopify Payments was also expanded to 22 countries during the latest quarter, while Shopify Capital helped numerous merchants access much-needed funding and loans.
The company is morphing into an all-in-one e-commerce player with multiple functionalities, and is also expanding its international presence steadily. These strategies take time to play out, but Shopify is moving in the right direction. Although 2023 may be a slower year for the company, it continues to devote money and resources to building the capabilities that will stand it in good stead to continue expanding its top and bottom lines in the future.
