Growth stocks have rallied in 2023 but remain far from full recovery after last year's brutal trading stretch. The growth-heavy Nasdaq Composite index is still down roughly 24% from its high and remains in bear market territory -- and there are some fantastic tech stocks trading down massively from recent highs.
While the near-term trading backdrop could continue to be volatile, investors who put their money behind the right growth stocks stand to see huge returns over time. If you're looking for high-quality investment opportunities capable of crushing the market over the long term, read on for a look at two category-leading tech stocks that are worth buying this month.
1. CrowdStrike
CrowdStrike (CRWD 0.13%) is a company that operates at the intersection of two unstoppable tech trends: the explosive rise of artificial intelligence (AI) technologies and the growing need for high-performance cybersecurity services.
With bad actors now using AI and other advanced technologies to carry out cyberattacks, businesses need high-performance cybersecurity protections, and CrowdStrike is providing best-in-class solutions. The company's Falcon platform uses artificial intelligence to make sure that computers, mobile devices, servers, and other hardware can't be attacked and used to breach networks, and it's been onboarding customers at an impressive rate.
The cybersecurity leader increased its subscription customer count 41% in the fiscal year ended Jan. 31 to more than 23,000 clients. It also once again exceeded its benchmark target for net revenue retention above 120% in each of last year's quarters. With a net revenue retention rate of 125.3% in Q4, existing customers increased their spending 25.3% on average, even in the face of less-than-favorable macroeconomic conditions. Thanks to these catalysts, the business ended the year with more than 400 subscription customers, generating annual recurring revenue of more than $1 million.
CrowdStrike's revenue for the year rose 54% to reach $2.24 billion, and its non-GAAP (generally accepted accounting principles) adjusted net income surged 81% to $355.6 million. It also posted roughly $676.8 million in free cash flow (FCF), coming in at a little more than 30% of revenue, and the business has now recorded an FCF margin of more than 30% for three years running. Even in the face of some macroeconomic pressures, the company is predicting an FCF margin of roughly 30% this year.
The stock, down 55% from its high, offers one of the best risk-reward profiles on the market. I'll be buying shares after the trading-restriction window associated with the publication of this article clears (per The Motley Fool's policy), and I expect that investors who take a buy-and-hold approach to the company will go on to enjoy very strong returns.
2. Airbnb
Airbnb's (ABNB 0.10%) recently published first-quarter report arrived with sales and earnings results that came in significantly ahead of Wall Street's expectations. The company posted earnings per share (EPS) of $0.18 on revenue of $1.82 billion, while the average analyst estimate called for EPS of $0.09 on sales of $1.79 billion. The performance marked the company's first ever profit in Q1, and the business posted impressive free cash flow of $1.6 billion in the quarter.
With such strong results, it wouldn't be unreasonable to think that the rental specialist's stock would be making big gains. However, its share price actually sank after the earnings release because Airbnb's forecast spooked investors. Management expects sales to come in between $2.35 billion and $2.45 billion in the current quarter, suggesting sales growth somewhere between 12% and 16%.
Like many companies, Airbnb is encountering macroeconomic headwinds, and it's also facing tough comparisons to periods that saw elevated demand as pandemic-related concerns eased.
On the heels of the recent sell-off, Airbnb stock trades down roughly 48% from its high. I think investors should take advantage of the valuation pullback here.
Airbnb's FCF jumped 32% year over year in the first quarter, and the company has now generated $3.8 billion in FCF over the trailing-12-month period -- good for a 44% margin across the stretch. With its market capitalization sitting at roughly $71 billion, the company is valued at less than 19 times trailing FCF -- a level that looks attractive in the context of the company's margins, growth rates, and remaining long-term expansion potential.
For growth-oriented investors, Airbnb presents attractive value at current prices. The company remains one of my largest portfolio positions, and I'll continue to buy shares in this great business.
