Technology stocks got hot again in 2023 as the sector benefited from multiple tailwinds, including the increased popularity of artificial intelligence (AI), cooling inflation, and the Federal Reserve hinting that a series of interest rate hikes may be ending. These tailwinds contributed to the Nasdaq-100 Technology Sector index jumping an impressive 40% so far this year.
Not surprisingly, Nasdaq stocks such as Meta Platforms (META 0.43%) and CrowdStrike Holdings (CRWD 2.03%) have been in fine form this year. Share prices of Meta shot up 161% in 2023, and CrowdStrike gained 76%. Let's look at why these two hot Nasdaq growth stocks are worth buying even after surging so much this year.
1. Meta Platforms
After a forgettable 2022 when its top-line growth stagnated, earnings declined, and the stock fell big time, Meta Platforms is on track for a turnaround year. The social media company's revenue fell 1% in 2022 and its earnings per share (EPS) crashed 38% to $8.59 as spending on digital advertising remained tight due to inflation.
Meta delivered better results this year with each passing quarter. Revenue increased 3% year over year in the first quarter of 2023 to $28.6 billion, while EPS fell only 19%. Revenue growth improved by 11% year over year in the second quarter, while EPS shot up 21% thanks to the company's focus on controlling costs.
Management's revenue estimate of $32 billion to $34.5 billion for the third quarter points toward a 20% year-over-year spike at the midpoint. Analysts anticipate the company will finish 2023 with a 14% jump in revenue to $132.6 billion and a solid rise of 56% in EPS to $13.41.
The acceleration in Meta's growth in 2023 suggests that it could deliver better-than-expected results, especially considering the increase in digital ad spending this year as well as the company's focus on integrating AI within its platforms to grab a bigger share of the market.
The anticipated revenue growth for 2023 suggests that the company is on track to outpace the 10% growth in the overall digital ad market this year. Moreover, global digital ad spending is expected to jump from an estimated $602 billion this year to $871 billion in 2027, according to eMarketer.
So, Meta is sitting on a secular growth opportunity, which explains why the company is expected to deliver healthy double-digit earnings growth.
META EPS estimates data by YCharts.
All this indicates that Meta should be able to sustain its stock market run. Also, the forward earnings multiple of 23.7 means that it is trading at a discount to the Nasdaq-100's forward earnings multiple of 26. So, it isn't too late for investors looking to buy Meta Platforms and set their portfolios up for long-term gains.
2. CrowdStrike Holdings
Cybersecurity specialist CrowdStrike Holdings caught the attention of the market this year for its stellar growth. Revenue in the second quarter of fiscal 2024 (ended July 31) increased an impressive 37% year over year to $732 million. Adjusted net income increased to $0.74 per share from $0.36 a year ago.
CrowdStrike expects its solid growth to continue for the rest of the year: Its fiscal 2024 revenue guidance of $3.04 billion would be a 35% increase over last year. Investors can expect the company to sustain such growth in the coming years thanks to its expanding addressable market.
Management puts its total addressable market at $76 billion, and $98 billion by 2025. By 2026, the company estimates that its addressable opportunity could be as big as $158 billion with the growing cloud security market, its planned offerings, and the organic increases in the niches it currently operates in.
So if its addressable market more than doubles over the next three years, the company is ready to capitalize with a sticky customer base that has been spending more money on its solutions, allowing it to build a sustainable revenue stream. Its dollar-based retention rate is more than the 120% the company registered for the past five-plus years.
This metric compares the annual recurring revenue (ARR) from a set of subscription customers to the ARR from that same customer set in the year-ago period. So, a reading of more than 100% means that CrowdStrike's customers adopt more of its offerings.
All this explains why ARR is now a healthy $2.93 billion, increasing 37% year over year last quarter. The metric calculates the annualized value of the company's subscription contracts at the end of a period, so its impressive growth points toward a robust revenue pipeline that could help CrowdStrike maintain solid growth in the future.
Not surprisingly, analysts anticipate CrowdStrike to keep growing nicely in the next couple of years as well.
CRWD revenue estimates data by YCharts.
Also, don't be surprised to see an acceleration in CrowdStrike's growth as the company capitalizes on the proliferation of AI within the cybersecurity market, suggesting that it is pulling the right levers to ensure that it remains a top growth stock in the long run.
