Many growth stocks are stalling right now as nearly every sector faces headwinds thanks to rising inflation and higher interest rates. Despite the pullback, there are still great companies out there that have fantastic long-term potential.
The three stocks listed below look like good buys right now as the companies continue to grow during a difficult time. Here's why CrowdStrike (CRWD 2.20%), Amazon (AMZN 0.81%), and Microsoft (MSFT 2.22%) deserve a spot on your next buy list.
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1. CrowdStrike
Cybercrime is on the rise and breaches, identity theft, and other crimes will come at a very steep price. Cybercrime will cost an estimated $23.8 trillion globally by 2027, up from $11.5 trillion this year. And while that's not a comforting statistic, the flip side is that all these threats are creating a massive cybersecurity opportunity for companies like CrowdStrike.
CrowdStrike is tapping into this cybersecurity opportunity with its cloud-based security services that help protect computer systems and mobile devices -- and demand is soaring. Even with the backdrop of macroeconomic headwinds CrowdStrike's sales increased 48% year over year in the fourth quarter to $637.4 million, driven by a 48% spike in subscription revenue to $405.4 million.
But the company is doing far more than just growing sales. It's also managed to keep its debt low while building up a strong cash position. At the end of the most recent quarter, CrowdStrike had just $741 million in long-term debt, with $2.7 billion in cash. With tech investors getting increasingly worried about a potential economic slowdown, this should put most CrowdStrike shareholders at ease about the company's long-term viability.
With the company's robust sales growth and solid cash position, CrowdStrike looks like a strong cybersecurity play that could have many more years of growth as this market continues to expand.
2. Amazon
Amazon may seem like an odd choice on this list right now considering that the company is in the midst of significant layoffs and its share price has declined 36% over the past year. But focusing too much on these short-term issues and overlooking Amazon's long-term opportunities would be a mistake.
First, Amazon is still the leader in the cloud computing market, with its Amazon Web Services (AWS) accounting for 33% of the market. And while competition is increasing in this space, AWS is still growing. Sales from the segment rose 29% in 2022, reaching $80.1 billion, and operating income grew by 23% to $22.8 billion.
Another area of long-term opportunity for the company comes from advertising. Yes, the ad market is a bit unstable right now, but that doesn't mean its story is played out. In 2022, Amazon's ad business generated $37.7 billion in sales, a 21% increase from 2021. And there's likely more where that came from.
Amazon still trails Meta Platforms and Alphabet's Google in the U.S. digital ad market right now, but its position is growing and it will take an estimated 13% of the market by 2026, according to Market Intelligence. And as it grows, some estimates suggest Amazon's ad business could reach $64 billion in annual revenue by that year.
With the company making significant gains in the digital ad space and still maintaining its dominance in cloud computing, investors may want to look past some of the company's recent speed bumps to the broader opportunity with this stock.
3. Microsoft
Microsoft has proved itself to be a resilient tech company that has reinvented itself several times over the past few decades -- including its pivot to cloud computing -- and the company is doing it again right now as it focuses on artificial intelligence (AI).
Microsoft's early investment in OpenAI several years ago is looking like a very wise move right now as the company's advanced chatbot, ChatGPT, has taken the tech world by storm. Microsoft has already implemented ChatGPT into its Bing search engine and its Microsoft 365 suite of apps to tap into this AI demand.
The market of AI-infused software is still getting started, but IDC estimates it'll exceed $500 billion this year. Already, tech companies are beginning to orient some of the services around AI and Microsoft's early bet could end up setting it apart from slower-moving peers.
Of course, AI isn't Microsoft's only growth strategy. The company's move into cloud computing years ago continues to pay off, as its Azure cloud business has continued to grow. Sales from the company's Azure and other cloud services segment popped 31% in the most recent quarter and Azure's share of the cloud infrastructure market continues to climb. Microsoft now holds 23% of the market, up from just 15% in 2019.
And Microsoft could continue to tap further into its cloud opportunities as the public cloud market grows from $525 billion this year to an estimated $882 billion by 2027.
Growth stocks require a little stoicism right now
There's no getting around the fact that many growth stocks are suffering right now as interest rates increase, inflation is still high, and some investors fear a potential recession is around the corner.
But despite these concerns, long-term investors know that buying and holding great companies that have strong advantages in their respective markets can pay off down the road. This means that benefiting from these growth stocks could require some bouts of stoicism while other investors are panicking.
