With spring in full swing, temperatures are heating up -- and so is the market for growth stocks. Spurred by strong earnings results from high-profile tech companies and a belief that the Federal Reserve will deliver one more rate hike this month and then lay off the throttle for a while, growth stocks have been rallying lately.
On the other hand, it's still easy to find stocks in the category that trade at big discounts, compared to highs reached over the last few years, and investing in the best of the bunch could have huge payoffs. If you're on the hunt for great tech plays, read on for a look at two growth stocks that are worth buying this month and holding for the long haul.
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1. CrowdStrike
The need for high-performance cybersecurity services will only continue to grow as threat vectors continue to multiply and attacks become more sophisticated. CrowdStrike's (CRWD 0.13%) AI-powered platform is already ahead of the curve and should keep learning and improving as it encounters new threats. For investors seeking growth stocks with attractive risk-reward profiles, the cybersecurity specialist stands out as a great long-term buy.
CrowdStrike's Falcon software helps protect mobile devices, computers, servers, and other hardware from being breached by bad actors to carry out attacks on networks. At the end of last year, 15 of the U.S.'s 20 largest banks, 70 of the Fortune 100 companies, and 271 of the Fortune 500 companies were using the cybersecurity specialist's services.The company has already established itself as the leading provider of endpoint security software for the large enterprise market and is now also prioritizing expanding with small-and-midsize enterprises (SMEs) as a core part of its growth strategy.
While macroeconomic headwinds suggest that uptake among SMEs might be less robust in the near term, CrowdStrike has huge long-term expansion potential in the category, and continued momentum among large customers should help the business post solid results this year.
After growing revenue by 54% annually last year to reach $2.24 billion, CrowdStrike expects to grow sales by roughly 34% and reach roughly $3 billion in the current fiscal year. Meanwhile, management's midpoint guidance calls for non-GAAP (adjusted) earnings per share to grow 49% and reach approximately $2.30 per share.
CRWD PE Ratio (Forward) data by YCharts.
While the company has a growth-dependent valuation and trades at roughly 52 times this year's expected earnings, CrowdStrike's business will almost certainly be able to persevere through economic headwinds. It also has incredible long-term expansion potential. Still, down roughly 59% from its high, CrowdStrike offers one of the best risk-reward profiles of any growth stock right now.
2. Snowflake
Snowflake's (SNOW -1.61%) platform-agnostic data warehousing software allows users to easily combine and analyze data from otherwise walled-off sources. These days, most large businesses use services from multiple cloud infrastructure providers, and the prevalence of multi-cloud setups and the importance of analytics has helped Snowflake grow at a rapid pace.
Through its dual growth engines of new-client additions and expanding business relationships with those already on board with its platform, Snowflake increased its product revenue by 70% last year to reach roughly $1.94 billion. The company also posted an adjusted free-cash-flow (FCF) margin of 25% in the period. Between its strong sales performance, impressive FCF margins, and a huge addressable market that's yet to be reached, the data specialist has incredible growth potential -- even if near-term momentum proves to be uneven.
During macroeconomic pressures, Snowflake expects its product-revenue growth rate to decelerate to 44% and 45% in this year's first quarter. For the full year, management forecasts product-revenue growth of approximately 40% and an adjusted free-cash-flow margin of 25%.
While the annual sales-growth target represents a substantial stepdown, compared to last-year's rate of expansion, the projected FCF margin and long-term revenue outlook remain encouraging. The company expects to have grown its product revenue from roughly $2.7 billion this year to $10 billion in its fiscal year ending January 2029.
With the market focusing on the growth slowdown this year and investors having yet to fully warm back up to growth-dependent tech stocks, Snowflake's share price is down roughly 63% from its high. For long-term investors seeking potential home-run plays, the data specialist's stock is a worthwhile buy right now.
