Despite persistently high inflation, four interest-rate hikes from the Federal Reserve, wars in Ukraine and Israel, and multiple high-profile bank failures over the past year, the S&P 500 index (SNPINDEX: ^GSPC) has rallied an impressive 23% in 2023. Many growth stocks have fared even better than the broader market, soaring this year after being previously beaten down to fractions of their post-pandemic highs.
It's extraordinarily difficult to determine how far this rally will go. But one thing is certain: The market will eventually pull back. And when it does, you can be sure the world's best investors will have their watchlists ready in order to take advantage of the sell-off.
So, what's an investor to do?
I think these three unstoppable growth stocks are worth considering.
1. Democratizing the power of software for work management
With its low-code-no-code Work OS platform, Monday.com (MNDY 2.81%) aims to "democratize the power of software" to help enterprises easily build custom work-management tools and software applications.
That goal might sound idyllic, but customers are obviously flocking to Monday.com solutions given its clear value proposition; Monday's number of customers grew 57% year over year last quarter to 2,077, and its net-dollar retention rate (NDRR) was a solid 110% -- meaning existing clients spent an average of 10% more on Monday's platform after their first year.
Better yet, Monday is beginning to realize significant operating leverage as it scales; revenue last quarter grew 38% year over year to $189.2 million, translating to its third straight quarter of positive non-GAAP (adjusted) operating income at $24.1 million, or 12.7% of revenue. Even based on generally accepted accounting principles (GAAP), Monday.com's march toward sustained profitability has never been more clear:
Assuming that march continues in the coming quarters, and with shares of Monday.com up 60% year to date, I'll happily add to my position on any market sell-off.
2. Relentless growth in a massive industry
Earlier this month, GitLab's (GTLB -0.98%) shares soared after the development, security, and operations (DevSecOps) platform company announced that third-quarter revenue grew a better-than-expected 32% year over year to $149.7 million. GitLab also raised its full-year outlook to call for 2023 sales of $573 million to $574 million (up from $555 million to $557 million previously). But GitLab is still very early in its long-term growth story, chasing a total addressable market that management estimates is already worth $40 billion annually and growing.
According to recent research from Gartner, while only 25% of enterprises currently use unified DevOps platforms like GitLab (with the rest toiling with multiple disparate tools to accomplish inferior end results). But that total should increase to 75% over the next four years, leaving GitLab perfectly positioned to capture a multiyear runway for growth.
Even more exciting, GitLab also delivered a surprise non-GAAP profit of $14.4 million, or $0.09 per share last quarter (versus estimates for a net loss of a penny per share), and achieved its first-ever quarter of positive adjusted operating income at $4.7 million (swinging from an operating loss of $21.6 million in the same year-ago period).
Given its massive total addressable market and focus on not just achieving growth but rather profitable growth, I'd love the chance to add to my position in GitLab if the market pulls back.
3. An integral part of enterprise customers' tech stacks
While Monday.com and GitLab have rallied on the heels of strong quarterly reports, MongoDB (MDB 4.83%) presents a slightly different opportunity today.
Shares of the leading NoSQL database platform provider actually plunged earlier this month after it announced its latest quarterly update -- and this despite the fact management raised MongoDB's full-year guidance after those results handily exceeded Wall Street's estimates. MongoDB's fiscal third-quarter revenue grew 30% year over year to $432.9 million, led by 36% growth in revenue from its Atlas fully managed cloud database product. That translated to adjusted net income of $79.1 million, or $0.96 per share. Most analysts were modeling earnings of $0.50 per share on revenue of only $404 million.
Just as I suggested might happen at the time, however, MongoDB has already partially recouped that short-term pullback. Shares are still up a whopping 110% year to date as of this writing.
So why is MongoDB such a compelling business? As CEO Dev Ittycheria pointed out during the company's latest earnings conference call, its database platform is increasingly becoming an integral part of enterprise clients' tech stacks, and the company is "winning new workloads from both new and existing customers across verticals, geographies, and customer segments."
Indeed, a recent report from The Business Research Company estimates the global database software market will reach a value of $189 billion by 2030, up from $112 billion in 2023. As MongoDB continues to capture an outsized piece of that market in the coming years, I'll be happy to buy on any pullbacks along the way.
