CFLT - The 3 Most Promising Tech Stocks to Own Now
2023-09-01 06:50:04 ET
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Technology has supercharged global growth for several decades now. There’s no question that technology companies have been leaders in creating solutions that increase productivity in the economy. As we advance, the top tech stock picks discussed are at the forefront of digital transformation and set for tremendous growth.
Innovations like cloud computing, fintech solutions, the blockchain and artificial intelligence will be central to the global economic transformation. Leading tech companies provide solutions that drive growth, create operating efficiencies and improve productivity.
This article will discuss some of the best-positioned must-own tech stocks . These tech industry leaders have superior technology to their peers. And they are constantly innovating and bringing products to market that make their customers’ work easier.
Due to the substantial productivity gains customers achieve, these companies’ solutions have become a critical part of the enterprise technology stack. As a result, these innovative players are top tech stock picks, given the increasing adoption of their products and the growing customer base.
ServiceNow (NOW)
ServiceNow (NYSE: NOW ) is an IT services management leader that has become a cornerstone of the productivity drives in enterprises. Its software as a service solution helps over 7,700 global enterprise customers improve productivity by automating workflows.
ServiceNow’s NOW Platform enables companies to integrate multiple and siloed software and data systems to create more efficient workflows. By automating workflows and reducing cross-system friction, its cloud software unlocks better customer service and improves productivity.
Its product leadership has translated into impressive revenue growth, making it one of the top tech stock picks. Revenues increased by 30% and 23% in 2021 and 2022, respectively.
Looking at annual contract value, it is clear that ServiceNow customers derive a lot of value from the product. Its second quarter fiscal year 2023 results revealed that 2010 customer cohorts starting with a $100 ACV grew to 2,726 by second quarter 23, a 202% annual growth rate. That’s an astounding growth rate from existing customers.
In addition, the quarterly results also revealed that overall revenue growth was still impressive despite the macro pressures. Subscription revenues grew 25% year-over-year, whereas remaining performance obligations increased 24%. Moreover, it reported solid profitability, achieving a 21% free cash flow margin in the quarter.
Still, the company is finding more levers for growth, especially with the advent of artificial intelligence. Recently, it announced an expansion of AI capabilities on the Now Platform. The new features will drive productivity, speed and value for customers.
Confluent (CFLT)
Confluent (NASDAQ: CFLT ) is a leader in the data streaming space. The company offers a cloud-native solution that provides engineers with the tools for real-time data streaming.
At its core is Apache Kafka, which is an open-source platform. Confluent adds features such as data flow visualization, audit logs, stream governance, data sharing and visual code generation tools to Kafka to enable easier scaling, management and security. Most of the Fortune 500 already use the open Apache Kafka but prefer Confluent’s enhanced capabilities.
Confluent is seeing increased demand as enterprises focus on enhancing their data processing capabilities to leverage AI. Quality data is crucial for better products and customer service. As enterprises focus more on their data streaming and infrastructure, Confluent is seeing more demand.
Second quarter results were impressive, exceeding consensus estimates on all metrics. Revenues grew 36% YOY to $189 million compared to $139 million in the prior year’s quarter. Additionally, customers with $100,000 or greater in ARR increased 33% YOY.
The market was also impressed with Confluent’s profitability. Non-GAAP margins saw a 24-point improvement to -9.2% from -33.5% in the previous year. Management also reiterated the mid-term operating margin target of 5%-10%.
Management noted their leadership position in the data streaming market. “These results underscore our leadership position in a $60 billion data streaming market, and our team’s track record of driving durable and efficient growth.” noted Chief Financial Officer Steffan Tomlinson.
Given the impressive growth, TipRanks analysts are bullish on the CFLT stock. The average price target of $39 represents a 20% upside. Artificial intelligence is highlighting the importance of quality data for enterprises, and Confluent is one of the top tech stock picks positioned to help customers in this area.
HubSpot (HUBS)
HubSpot (NYSE: HUBS ) has been one of the leading tech companies in customer relationship management. Its software-as-a-service solution helps enterprises in communications and marketing.
Despite the heavy competition in the category, it has managed a higher growth rate than its peers through differentiation. First, HubSpot has focused on the mid-market, targeting small to midsized enterprises.
Secondly, the company has differentiated its solution through inbound marketing. Instead of push marketing, its CRM solution uses inbound marketing, which relies on providing helpful content to attract and engage customers.
Thirdly, it has built its CRM suite from the ground up. Rather than using an acquisition strategy like its rival Salesforce (NYSE: CRM ), it has developed all features in-house. For instance, in 2021, it introduced a payment solution to support companies accepting digital payments.
These strategies have enabled HubSpot to thrive in a crowded CRM market. The 25% revenue growth in the latest quarter showed that financial performance continues to be impressive. In addition, profitability has also improved materially, with non-GAAP operating margins rising to 14% from 7% in the previous year’s quarter.
HubSpot remains in growth mode since it’s the platform of choice for scaling companies. Notably, customers grew 23% YOY in Q2 FY2023, highlighting the solid momentum. The company is just scratching the surface and remains one of the top tech stock picks.
On the date of publication, Charles Munyi did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .
Charles Munyi has extensive writing experience in various industries, including personal finance, insurance, technology, wealth management and stock investing. He has written for a wide variety of financial websites including Benzinga, The Balance and Investopedia.
More From InvestorPlace
- Musk’s “Project Omega” May Be Set to Mint New Millionaires. Here’s How to Get In.
- ChatGPT IPO Could Shock the World, Make This Move Before the Announcement
- It doesn’t matter if you have $500 or $5 million. Do this now.
The post The 3 Most Promising Tech Stocks to Own Now appeared first on InvestorPlace .