The tech industry has been one of the most volatile sectors in the past year. It has soared to record highs and experienced wicked periodic selloffs, all within a span of months. Following the approval of COVID-19 vaccines and news about their deployment , the tech industry faced a sharp pullback, as investors grew anxious that the normalization of economic activities would moderate the sector’s growth potential. However, these stocks have mostly recovered since then, as a second strain of coronavirus has called or renewed nationwide lockdowns, mainly across Europe. This, and attendant new travel bans, has paved the way for another tech rally.
The technology industry has been on an uptrend for quite some time, with increasing dependence on online platforms. The S&P 500 Information Technology index has gained 27.4% over the past three years. While the pandemic has accelerated this growth, many believe that the remote lifestyle trend is likely to stay because of the increased productivity it has yielded.
Companies such as Shopify, Inc. (SHOP), CrowdStrike Holdings, Inc. (CRWD) and Sonos, Inc. (SONO) have reported substantial gains in revenues and other financial metrics over the past couple of years, upholding their reputation as growth stocks. As the tech rally is expected to continue in 2021, we think that these companies are well positioned to keep climbing.
Shopify, Inc. (SHOP)
SHOP is an up-and-coming e-commerce platform that is shattering records with its growth rates. It caters primarily to small- and medium-sized businesses, allowing owners to exhibit their products and services. Based in Canada, SHOP currently operates in 175 countries across various continents. The company has demonstrated resilience and a capacity to fend off stiff competition from industry leaders.
SHOP generated more than $5.10 billion within three days of the Black Friday sale (Nov 27 – Nov 30), a 76% gain versus the same period last year. In fact, the company’s sales for the week (Nov 23 – Nov 30) increased 84% year-over-year.
SHOP’s revenue has increased 96% year-over-year to $767.40 million in the third quarter ended September 30, 2020. This can be attributed to a 48% and 132% increase in subscription solutions revenue and merchant solutions revenue, respectively, over this period. Its Gross Merchandise Value has increased 109% from the year-ago value to $30.90 billion, while gross profit rose 87% from the same period last year to $405.10 million. Its EPS has increased substantially from the negative year-ago value to $1.54.
While the coronavirus-pandemic driven e-commerce boom has been a major contributing factor in SHOP’s growth over the past couple of quarters, the company has been one of the biggest growing platforms for quite some time. SHOP has gained 1060% over the past three years owing to its impressive rise in revenues and total assets. SHOP’s revenue has increased at a CAGR of 61.7% over the past three years, while its tangible book value and total assets have increased at CAGRs of 81.9% and 89.2%, respectively, over the same period.
The consensus EPS estimate of $1.27 for the third quarter ending December 31, 2020 indicates a 195.3% improvement year-over-year. The company has an impressive earnings surprise history as well; it beat the street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $906.17 million for the ongoing quarter indicates a 79.4% rise from the same period last year.
SHOP has gained 187.2% over the past year. The stock hit its 52-week high of $1,285.19 on December 22.
How does SHOP stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
A for Peer Grade
A for Overall POWR Rating.
It is currently ranked #1 of 37 stocks in the Internet – Services industry.
CrowdStrike Holdings, Inc. (CRWD)
CRWD is a cloud-based securities service provider operating through its proprietary ‘Falcon’ platform. The company uses integrated technologies of lightweight agent and threat graph to provide all round coverage to its clients, including monitoring, management, response, and remediation solutions. It is one of the fastest growing stocks in the cybersecurity space, as its revenues have increased 85.9% year-over-year.
CRWD has a long-standing partnership with Amazon. Inc.’s (AMZN) Amazon Web Services (AWS). In November, CRWD became a launch partner for AWS network firewall, which provided protection for all AWS’ virtual private clouds. CRWD launched its services on AWS marketplace in December to provide contact cybersecurity services to customers through the platform.
CRWD released a new security module, Falcon X Recon, in October. This provides a higher level of situational awareness to users. This allows users to steer clear of malicious websites and receive immediate notifications regarding breaches of security.
CRWD’s revenues have increased 86% year-over-year to $232.50 million in the fiscal third quarter ended October 31, 2020. This can be attributed to an 87% year-over-year increase in subscription revenues over this period. Its annual recurring revenue has risen 81% from the year-ago value to $907.40 million, while gross profit grew 94.8% from the same period last year to $170.93 million.
The consensus EPS estimate of $0.08 for the fiscal third quarter ending January 31, 2021 indicates a 500% improvement from the year-ago value. Moreover, CWRD beat the Street EPS estimates in three of the trailing four quarters, which is impressive. The consensus revenue estimate of $249.35 million indicates a 63.9% rise year-over-year.
CRWD has gained more than 540% since hitting its 52-week low of $31.95 in March.
It is no surprise that CRWD is rated “Strong Buy” in our POWR Ratings system, with an “A” for Trade Grade, Peer Grade and Industry Rank, and a “B” for Buy & Hold Grade.
Sonos, Inc. (SONO)
SONO designs and manufactures wireless multiroom audio systems, home theater products, voice enabled systems, and accessories. The company sells its products across the United States and Europe through its website, retail and e-commerce chains, and third-party subsidiaries.
On December 15, SONO entered a multi-year licensing agreement with Legrand. Under this deal, Legrand will pay to license SONO’s patents and integrate the technology with its NUVO multiroom wireless audio devices. This allows SONO to market and lease its proprietary technology to third parties, enhancing its brand value and revenues simultaneously.
In November, SONO repurchased 3.80 million shares of its stock worth $50 million. This will allow the company to generate higher per-share returns for existing shareholders in the long term. Also in November, SONO launched Sono Radio HD, an ad-free, high-definition streaming radio service. The launch allows SONO to compete with leading music streaming platforms around the world.
SONO’s revenue and EBITDA have increased at CAGRs of 10.2% and 23.9%, respectively, over the past three years. The company’s tangible book value increased at a CAGR of 2,016.3% over the same period. These impressive gains reflect the company’s growth over the past three years.
SONO’s revenues have increased 16% year-over-year to $339.80 million in the fiscal fourth quarter ended October 31,2020. Non-GAAP net income has risen 345.2% year-over-year to $40.70 million, while non-GAAP EPS has increased 320% from the year-ago value to $0.33. Its gross margin gained 530 basis points from the prior-year quarter to 47.5%.
The consensus EPS estimate of $0.87 for the current quarter ending December 31, 2020 represents a 45% improvement from the year-ago value. Analysts expect SONO’s revenue to rise 10% in the current year, and 8.6% next year.
SONO has gained more than 285% to hit its 52-week high of $25.40 since hitting its 52-week low of $6.58 in March.
SONO’s POWR Ratings reflect this positive outlook. It is rated “Strong Buy” with an “A” for Trade Grade, Peer Grade and Industry Rank, and a “B” for Buy & Hold Grade. In the 38-stock Technology – Electronics industry, it is currently ranked #9.
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SHOP shares were trading at $1,163.00 per share on Wednesday afternoon, down $8.61 (-0.73%). Year-to-date, SHOP has gained 192.52%, versus a 17.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don’ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More…
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