Saving for retirement should always be on your list of top goals. However, simply socking money into your 401(k) may not be sufficient for you to accumulate enough because of high inflation. Instead, you should consider parking at least part of your money in growth stocks that can not only beat inflation, but also garner you a better return for your efforts.
In particular, the technology sector is well-known for its ability to grow quickly as digitalization becomes an increasingly important aspect of the global economy. Some of these businesses may be small but have promising growth runways that can enable them to keep growing, thus helping to compound your money and build up that retirement fund.
Here are three attractive technology stocks that could help make you better off by retirement.
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Toast
Restaurant operators can rely on Toast (TOST 2.71%) to help them organize and digitize their operations. The company covers the entire restaurant ecosystem from point of sale and payment processing to loyalty marketing and inventory management.
Toast has seen its subscription revenue increase at a rapid clip, more than tripling from $101 million to $324 million from 2020 to 2022. Total revenue has also surged in tandem, going from $823 million to $2.7 billion in the same period.
The business's growth momentum has carried on into 2023, with its latest second quarter seeing a record addition of more than 7,500 net new locations, bringing total locations to 93,000, up from just 68,000 a year ago. For the first six months of 2023, revenue surged by 48.5% year over year to $1.8 billion, with subscription revenue soaring 63.3% year over year to $227 million.
In its latest quarter the business also saw its annualized recurring run rate exceed $1 billion for the first time while it generated its first positive free cash flow of $39 million.
NYSE: TOST
Key Data Points
Toast believes that it is still early days as it operates in one of the largest industries in the U.S. and globally. The restaurant sector employs around 12 million Americans, and has 860,000 locations in the U.S. and 22 million in the world. Its cloud solution helps to remove pain points for budding business owners, who can use its software to automate many aspects of their business.
Its cloud offering can also assist restaurants in catering and event management, automate repetitive tasks, and customize event orders and quotes, providing restaurant owners with a holistic business solution that should endear them to the software. The company has identified a serviceable addressable market of $15 billion, but the sky is the limit -- the global total addressable market is estimated to be around $110 billion.
Braze
Braze (BRZE 0.55%) operates a cloud customer relationship management (CRM) platform to help brands better understand and connect with their customers. These brands can better engage their customers through effective marketing strategies and campaigns.
The company saw rapid top-line growth from fiscal 2021 (ended Jan 31) to fiscal 2023 as revenue more than doubled from $150.2 million to $355.4 million. Braze's gross margin also crept up steadily during this period from 63.7% to 67.4%, with gross profit leaping 150.4% from $95.7 million to $239.6 million.
NASDAQ: BRZE
Key Data Points
For the first six months of fiscal 2024, Braze's revenue continued to climb, rising by 32.6% year over year to $216.9 million. The business also generated a positive free cash flow of around $3 million. Gross margin rose once again, touching 69.2% for the business's second quarter, and the dollar-based net retention rate for all customers stood at 120% for the trailing 12-month period ended 31 July.
Total customers increased by 22.5% year over year to 1,958, with a 24% year-over-year growth in large customers contributing more than $500,000 in annual recurring revenue.
Braze has identified opportunities to expand globally, and already has customers in Singapore (Endowus) and Latin America (Rappi), as well as 70 other countries. A total of 2.2 trillion messages were sent in fiscal 2023, and Braze's platform boasts 5.5 billion monthly active users. The company intends to boost its artificial intelligence offerings next year and offer new solutions to its customers.
The business looks set to continue growing, with its comprehensive cloud solution coupled with an attractive "land and expand" strategy.
Cloudflare
Cloudflare (NET +3.30%) is a cloud service provider that helps its clients to enhance the performance and security of their business applications and reduce costs when managing their hardware. As of June 2023, three out of every 10 Fortune 1,000 companies are paying clients of Cloudflare, demonstrating the business's reputation and impressive reach.
From 2020 to 2022, Cloudflare's revenue more than doubled from $431.1 million to $975.2 million. Its cash flow profile has also improved dramatically over this period, going from an operating cash outflow of $17.1 million in 2020 to an operating cash inflow of $123.6 million by 2022. For the first half of 2023, the company saw this momentum continue as it posted a 34% year-over-year increase in revenue to $598.7 million.
The business finally generated a positive free cash flow of $33.9 million, reversing the free cash outflow in the prior year.
NYSE: NET
Key Data Points
Cloudflare has a well-defined growth strategy. The company plans to acquire new customers while expanding relationships with existing ones by encouraging them to increase usage and upgrade to premium plans. Meanwhile, the business will also develop new products to bring to market and extend its serverless platform strategy to open new market opportunities.
The company currently boasts 174,000 paying customers, of which 2,352 generate more than $100,000 in annualized revenue, defined as "large customers". These large customers saw a compound annual growth rate of 47% over the past two years, implying that Cloudflare's customers are spending more.
The company estimates that its current total addressable market is around $146 billion and will grow to about $204 billion by 2026, with areas such as artificial intelligence and the Internet of Things acting as catalysts. These numbers mean that in the coming years the business has more than ample opportunities to grow its top line and generate positive free cash flow.
