The one great thing about stock investing is that different types of stocks suit different types of investors. One type is particularly popular nowadays: growth stocks. These are companies that are expected to grow earnings faster than the market average. It's easy to see why growth stocks are popular, too. They give investors the chance to produce market-beating returns and capitalize on a company's future success.
If you have $1,000 available to invest (meaning you have an emergency fund saved and high-interest debt paid down), the following two companies are good investment options to consider. Investing $500 into each can expose investors to top players in fast-growing industries.
1. CrowdStrike
CrowdStrike (CRWD -0.01%) is one of the premier cybersecurity companies in the world and is working hard to strengthen its competitive advantage.
While artificial intelligence (AI) has recently become mainstream, it's far from a new technology. CrowdStrike can attest to this, as the company has been using AI to automate the cybersecurity process since it released its first platform in 2011. It essentially pioneered the pure AI-based solutions model.
CrowdStrike's jump on pure AI-based cybersecurity solutions has worked quite well for the company. In the fourth quarter, the company generated $283 million in free cash flow, up 35% year over year and well above what it was just a few years ago.
CRWD Free Cash Flow (Quarterly) data by YCharts
The impressive growth of CrowdStrike's free cash flow is aided by its growing annual recurring revenue (ARR), a key financial metric for companies whose business models are subscription-based, like CrowdStrike. In its fiscal year 2024, CrowdStrike brought in $875 million in new ARR, bringing its total to $3.44 billion.
Free cash flow and ARR are good indicators of the company's financial health because they show its ability to generate profits from a stable revenue base. And looking at its market opportunity, there seems to be much more room for this to continue.
CrowdStrike and market intelligence firm IDC estimate the total addressable market (TAM) for the AI-native security platform to be around $100 billion in 2024. In 2028, they expect the TAM to hit $225 billion, leaving plenty of growth opportunities for CrowdStrike in that specific cybersecurity lane.
CrowdStrike is well positioned to be around for the long haul.
2. DraftKings
DraftKings (DKNG -0.81%) has become the leader in online U.S. sports betting and iGaming and shows no signs of slowing down anytime soon.
Although DraftKings has been around for over a decade, the recent decision by the U.S. Supreme Court to allow states to legalize and regulate sports betting individually has opened a new world of opportunities for the company. So far, it's done a great job of taking advantage of the fast-growing market.
In the fourth quarter of 2023, DraftKings generated $1.23 billion in revenue, up 44% year over year. Perhaps more importantly, the company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) finally turned positive, reaching $151 million (a $201 million increase year over year).
DraftKings has noted that its current priority is capturing as much market share as possible, so profitability hasn't been the top priority, but its recent impressive financial performance hints that profitability could be around the corner. This is especially true if DraftKings' free cash flow continues on its current trend.
DKNG Free Cash Flow (Quarterly) data by YCharts
In its fiscal year 2024, DraftKings expects its free cash flow to come in between $310 million and $410 million, giving it a good amount of financial leeway to supplement its organic growth with other means of growth, like acquisitions. It has shown it doesn't mind doing the latter, with a recent $750 million acquisition of Jackpocket, the No. 1 lottery app in the U.S.
DraftKings' Jackpocket acquisition will give it a stronghold in the $100 billion-plus lottery industry. It will also allow it to cross-sell its products, increase customer acquisition, and strengthen its overall business by opening new revenue streams and reducing the risks of concentrated business models.
There's no denying that the U.S. sports betting market is growing rapidly (for better or worse, but that's a different story), and DraftKings is one of the top players in the industry. That's a recipe for good value to be returned to shareholders.
