What a difference a year makes! Investors couldn't sell growth and tech stocks fast enough in 2022, but they've come roaring back this year -- and for a good reason. Tech permeates our lives, and tech companies are still successful, even in this challenging economy. The headline says you can hold these stocks for a decade, so they better be in growing industries -- and both companies are.
First, we have CrowdStrike (CRWD 2.03%). This artificial intelligence (AI)-powered cybersecurity company operates in an industry forecast to grow from $174 billion in 2022 to $266 billion in 2027, and probably far beyond that. We will see that CrowdStrike is a favorite of some of the most successful enterprises on the planet.
Next up is the one and only Amazon (AMZN 3.43%). Most of us think we know Amazon pretty well, but do we really? Aside from having over 200 million Prime subscribers and a stranglehold on e-commerce in the U.S., Amazon has a gold mine growing in digital advertising and some neat stuff happening in the world of AI.
CrowdStrike outlines a bold path
Cybersecurity is top of mind for all organizations. Breaches and malware cost tons of money in fixes, downtime, reputation hits, and much more. Spending money for the best protection is the winning play.
When it comes to breaches, 70% occur at endpoints, CrowdStrike's specialty. Protecting 18% of the endpoint market, CrowdStrike's Falcon platform outpaces Microsoft's 16%. No other company is in double digits. CrowdStrike's share at 62% is also growing faster than Microsoft's at 59%, according to Gartner's latest report. This is just one reason CrowdStrike is one of my top tech stocks.
There's no better judge of a product than customer testimonials. CrowdStike grew its customer base from 9,896 to 23,019 in the last two years. These include 70 of the Fortune 100 companies and a majority of the Fortune 500.
The Falcon platform is extremely sticky -- once customers sign up, they tend to stay -- to the tune of a 98% retention rate. Customers tend to spend more money each year through upgrades or additional modules. This allowed CrowdStrike to grow its annual recurring revenue by 42% to $2.7 billion over the past 12 months.
CrowdStrike's revenue is growing much faster than AI-favorite Palantir, and its price-to-sales (P/S) ratio is lower, as shown below.
CRWD Revenue (TTM) data by YCharts.
Both companies use AI and have tremendous futures, but CrowdStrike has a more attractive valuation, higher growth rate, and flies a little more under the radar at this point. Buy-and-hold growth investors should consider this stock.
Is Amazon stock a buy?
Amazon stock was hammered when the pandemic-related tech bubble burst in 2021 and still sits 30% off its all-time high, despite substantial price gains in 2023. The company offers a lot to like for long-term investors.
Amazon's U.S. e-commerce market share is not just big at 38%, it's dominant when you consider Walmart's second-place share at 6%. This market is expected to grow from $819 billion in 2022 to $1.4 trillion in 2027, which implies a 12% compound annual growth rate (CAGR) just by maintaining its position. Amazon's initiatives in acquiring Prime subscribers, like airing NFL football games and Prime Video, indicate that the company isn't resting on its laurels.
Amazon Web Services (AWS) has been a major concern for investors lately as its annual growth slowed from over 30% in prior years to 16% year over year last quarter. Many AWS customers pay for what they use, so as the economy slows, customers seek to use less data and lower their spending.
Amazon has taken the correct approach and proactively helped its customers reduce their bills. This may hurt short-term sales but will build trust and long-term customer relationships. This long-term approach will pay off for years.
What do you think of when companies talk about the fantastic power of AI? I think of the computing power required to handle ridiculous amounts of data, among other things. As AI ramps up, AWS will benefit as customers utilize this platform to run these data-intensive programs. In this way, AWS is an excellent pick-and-shovel play on AI.
While Amazon stock is still well off its all-time high, it's risen quite a bit in 2023. Interested investors should spread their purchases out over time to take advantage of potential dips in price. Amazon remains the quintessential growth stock, despite rumors to the contrary.
CrowdStrike and Amazon operate successfully in industries that will be in demand for years. Those looking for growth stocks for the long haul can start their searches right here.
