After collapsing in 2022, growth stocks are back with a vengeance in 2023.
Tech stocks have soared this year, bouncing off of rock-bottom valuations at the end of 2022, and benefiting from signs that the tech industry may already be rebounding from last year's slowdown.
Growth stocks, many of which hail from the tech sector, are also surging this year as the Vanguard Growth ETF is up 27% this year and we aren't even at the halfway mark.
If you're looking for growth stocks that should win over the long term, keep reading to see a pair that could give you lasting returns.
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1. The Trade Desk
The Trade Desk (TTD -2.44%) is known as the leading adtech company and that title is well deserved. The company was a pioneering demand-side platform (DSP), offering a cloud-based, self-serve, automated system for brand and ad agencies to manage their ad campaigns.
The Trade Desk's platform has proven popular as the company has had a customer retention rate of at least 95% every quarter for the last eight years, and it continues to put up strong growth even in a difficult environment for advertisers. Digital ad giants like Alphabet and Meta Platforms have essentially seen revenue growth stall in recent quarters.
Meanwhile, in its first quarter, The Trade Desk posted a solid earnings report with revenue up 21% to $383 million, and the company is also solidly profitable, unlike most growth stocks. Adjusted net income in the quarter rose 9% to $114 million.
In addition to its leading position in digital adtech, which has a lot of growth in front of it as the connected TV market is just beginning to emerge, The Trade Desk is also well positioned for a cookie-less world as Google is set to ban third-party cookies from Chrome. The Trade Desk's Unified ID 2.0 (UID 2.0) protocol gives companies a way to track customers through a hashed email address, allowing for more privacy protections than third-party cookies but still enabling ad targeting.
UID 2.0 has been embraced by major advertisers including Walt Disney, Procter & Gamble, and NBC Universal, a bullish sign for The Trade Desk as it enters the next era of digital ads.
The Trade Desk is still down more than 30% from its peak in 2021, and the stock should come roaring back once the ad market starts to rebound.
2. MongoDB
Another tech stock fresh off a strong earnings report is MongoDB (MDB -2.02%), which specializes in NoSQL database software, allowing companies to store, manage, and analyze data in ways that go well beyond the constraints of the typical spreadsheet.
In its just-reported first-quarter earnings, revenue jumped 29% to $368.3 million, driven by 40% growth from MongoDB Atlas, its cloud-based database-as-a-service product. Atlas made up 65% of revenue in the first quarter.
MongoDB also posted its biggest customer growth in two years, showing that its product is a must-have for companies even in a challenging macro environment. CEO Dev Ittycheria called it "mission-critical."
The database specialist added 2,300 customers in the quarter, reaching 43,100, and it now has nearly 2,000 customers generating $100,000 in annual recurring revenue.
MongoDB uses a consumption-based model, meaning it charges customers based on usage. That kind of model can be more sensitive to changes in the macroeconomic environment, but the company is, nonetheless, delivering solid growth. Meanwhile, it's now profitable on a non-GAAP (adjusted) basis as adjusted profit per share jumped from $0.20 in the quarter a year ago to $0.56.
The company also fended off a challenge a few years ago from Amazon, which had launched a competing service called DocumentDB, but MongoDB has now clearly established itself as the leader of the NoSQL database software niche, and it could be a winner from the artificial intelligence (AI) boom as that will create more demand for databases to train and run AI models.
For the full year, MongoDB is targeting revenue growth of 20%, but after the upside surprise in the first quarter, the company could easily do it again this year, especially as the demand environment in the tech sector already seems to be recovering.
