If you're in the market for some tech stocks to add to your portfolio, there are a few that come to the top of my mind that look like great buys right now. Not only are they putting up impressive growth numbers, but they also have bright futures ahead.
So let's look at three tech stocks that look like solid buys right now.
1. CrowdStrike
Cybersecurity is at the forefront of many businesses. A breach can result in a damaged reputation, lost customers, and an expensive bill. To minimize the possibility of a successful cyberattack (because they will come regardless of what protection is deployed), many companies have chosen to use CrowdStrike's (CRWD -1.82%) services.
CrowdStrike provides endpoint security protection, which keeps network access points like laptops and cloud workloads safe. Third-party Gartner recognized CrowdStrike as a leader in this space for the third consecutive year, which speaks to the strength of its platform.
It also has impressive financials: CrowdStrike's annual recurring revenue rose 48% in Q4 of FY 2023 (ending Jan. 31) to $2.56 billion. From that revenue, it converted an impressive $209 million into free cash flow (FCF).
Even though the stock was up around 30% year to date, it trades at 14 times sales -- still around the cheapest it has ever traded at as a public company. Cybersecurity is a massive market, and CrowdStrike remains one of the top ways to invest in this space.
2. DigitalOcean
Nearly all industries are adopting cloud computing, but making the transition isn't easy and requires a lot of resources. Because of that, big cloud computing providers don't invest much time or effort into providing adequate avenues for small and medium-sized businesses.
DigitalOcean (DOCN -0.54%) fills this void by focusing solely on this client base, which DigitalOcean estimates is a $98 billion market opportunity. However, this market is set to explode in growth, as DigitalOcean estimates that it will grow to $195 billion by 2026. That's plenty of opportunity to invest in, and DigitalOcean looks like a smart pick.
In Q4, DigitalOcean's revenue grew by 36%, which was helped out by a price hike initiated last July. This will be a challenge later this year when results overlap this increase, but DigitalOcean still expects to grow its revenue by 23% throughout 2023. Like CrowdStrike, DigitalOcean produces solid FCF, converting 22% of revenue into FCF in Q4.
With a massive market opportunity and a loyal customer base (that didn't leave when prices rose), DigitalOcean's stock looks like a steal at around seven times sales.
3. The Trade Desk
Advertisers aren't satisfied with plastering the web with their ads anymore. Instead, they want to target their ads to specific audiences, as that provides the most return on investment for their spending.
One of the top companies advertisers are turning to is The Trade Desk (TTD -2.44%). With The Trade Desk's demand-side platform (which serves advertisers), it can utilize in-house data, third-party data, and customer-specific information to determine how much companies should automatically bid on each ad. This helps deliver unprecedented performance and a sticky platform -- 95% of all customers stuck with The Trade Desk in Q4, marking nine consecutive years of achieving this status.
As you can imagine, business results like that translate into strong financials. The Trade Desk's revenue rose 24% in Q4, producing $0.14 per share in earnings. Because advertising is such a massive industry, The Trade Desk has an enormous growth runway, translating to an expensive valuation.
TTD PS Ratio data by YCharts
This is the primary drawback of the stock, but with a long growth runway ahead, the valuation is less concerning.
The Trade Desk remains a solid stock to buy, but you must have a long-term mindset before purchasing it, as its premium valuation will cause extreme price fluctuations.
