In this market environment, following the buy and hold investment strategy may seem like a bad bet, especially in the technology sector. Many top growth tech stocks have lost more than 75% in value over the past year, and the Ark Innovation ETFwhich holds a significant portion of its assets in emerging technology stocks, has lost two-thirds of its value since last June.
But short-term issues aside, the buy-and-hold approach has served investors well in many top tech stocks over periods of 10 years or more. And three of our contributors believe that new investors in Selling power (RCMP 1.09%), Crowdstrike Holdings (CRWD 1.22%)and Focus on video communications (ZM 0.36%) could benefit from this strategy.
A commercial center selling at a discount
Jack Lerch (Salesforce): HOlding stocks for a decade or more is a great way to build wealth. And when choosing investments you intend to hold for the long term, it’s best to focus on companies with a strong track record of execution and solid future prospects. Selling power is just such a business.
It is one of the world’s leading cloud-based customer relationship management (CRM) software. Its products help companies develop leads, share data and close deals. Salesforce has more than 150,000 customers who rely on its applications to become more efficient, integrated and profitable.
Salesforce generated $28 billion in revenue and $19.5 billion in gross profit over the past 12 months. And the top line continues to soar. In the first quarter of fiscal 2023, revenue grew 24% year-over-year, which is impressive for a company with a market capitalization of $156 billion. Additionally, Salesforce has more than tripled its annual free cash flow over the past five years to $5.72 billion.
Yet, over the past 12 months, its share price has experienced severe turbulence. Shares are down 40% from last year’s all-time high. And even after a recent moderate rally, Salesforce’s price-to-sales ratio is around 6.5, near its all-time low.
Analysts expect Salesforce to generate $31.8 billion in revenue in its 2023 fiscal year and $37.5 billion in its 2024 fiscal year. Wall Street also forecast earnings per share of 4 $.75 this year and $5.82 next year.
It all adds up to a business on a roll. Salesforce continues to grow at a healthy pace, generating plenty of free cash flow. Additionally, the recent market sell-off gives investors a chance to buy the stock at a historically cheap valuation. In my opinion, this makes it an easy title to buy and hold for the next decade or more.
A new generation of cybersecurity
Justin Pope: (CrowdStrike Holdings): Cybersecurity is quickly becoming a priority for businesses as they become increasingly dependent on data and digital systems. According to research by IBM, the average company data breach in 2021 cost its victim $4.2 million. According to Cybersecurity Ventures, global cybersecurity spending could rise from $262 billion in 2021 to $459 billion by 2025.
CrowdStrike offers investors exposure to this growth. Its proprietary cloud-based Falcon platform acts as a network, connecting all the devices it protects. The more devices connected to the platform, the faster it learns. And a threat detected in Denver will teach the artificial intelligence of the Falcon platform how to protect a device in San Jose from the same threat in real time. No more waiting for the software vendor to release an antivirus update while your devices and systems remain vulnerable.
Businesses of all sizes buy CrowdStrike technology. Its customer count was 17,945 as of April 30, and that figure includes 65 from the Fortune 100 and 254 from the Fortune 500. Its software-as-a-service (SaaS) model generated $1.9 billion in annual recurring revenue as of April 30. an increase of 61% over the previous year. Rapid growth doesn’t cost CrowdStrike profits either. It became free cash flow positive in 2020 and already converts 32% of its revenue into cash.
Despite its strong trade execution, the current bear market has caused CrowdStrike shares to fall more than 20% over the past year. The stock has a price-to-sales ratio of 23. That might sound expensive, but the stock hasn’t been priced this cheap since March 2020.
CrowdStrike is gaining customers across all US businesses, which bodes well for its prospects. Global cybersecurity budgets will only increase, and the high costs of data breaches are expected to continue pushing companies toward cutting-edge products like its Falcon platform. The stock’s decline this year is a gift to potential investors, giving them the opportunity to buy this quality stock at a low price and hold onto it for years of growth.
A pandemic darling with a bright future
will heal (Zoom video communications): Investors may at first glance appear to have little reason to buy Zoom stock in 2022. As workers return to the office, companies are likely to hold fewer online meetings. Additionally, Zoom has cratered with other growth tech stocks — down more than 80% from the high of $589 it hit in October 2020.
Nonetheless, Zoom retains a 74% market share among web conferencing platforms, according to Datanyze. Its closest counterpart, Cisco, has a 7% market share.
Moreover, the use of Zoom’s services seems set to grow. It started offering whiteboard features and a company-branded chat app that should reduce the need for workers to travel to meetings. It is also working to use metaverse features to make more meetings possible in remote environments.
His strategy is showing the first signs of success. As of April 30 – the end of its first quarter of fiscal 2023 – the number of Zoom customers who had spent more than $100,000 with it in the previous 12 months had increased by 46%. Zoom now claims nearly 199,000 enterprise customers, 24% more than a year ago. Revenue reached just over $1.07 billion, an increase of 12% over the prior year period. Certainly, rising operating costs, strategic spending losses and rising income tax charges reduced net income by 50% during this period to approximately $114 million. Moreover, given its revenue growth of 55% in fiscal year 2022, a 12% gain may not seem significant.
However, with its stock falling sharply, Zoom’s price-to-earnings ratio now stands at 28, down from nearly 140 last July. Cisco, owner of Webex, can sustain an earnings multiple of less than 16. But given that Cisco is struggling with steady revenue growth and Zoom dominates its industry, Zoom shares have more upside potential over time. time.