Revenue growth is one of the most important factors in determining the long-term performance of a stock. It’s great to see a business reduce costs and operate more efficiently, but that sort of fine-tuning can only take a company so far.
In my experience, businesses that deliver consistently strong revenue growth tend to outperform their peers, creating greater wealth for shareholders. With that philosophy in mind, both CrowdStrike(NASDAQ:CRWD) and PayPal (NASDAQ:PYPL) look like good long-term investments. Here’s why these two growth stocks could double your money.
1. CrowdStrike: Preventing cyberattacks
CrowdStrike protects its clients and their data from hackers. The company’s Falcon platform delivers security from the cloud, safeguarding workloads in any environment (cloud, on-premise, virtualized) and on a variety of endpoints, from desktops and servers to Internet of Things devices and virtual machines.
In recent years, cyberattacks have become increasingly common and sophisticated. In fact, CrowdStrike reported more attacks in the first half of 2020 than in all of 2019. That’s a big problem for unprotected or under-protected businesses, because the average data breach costs $3.86 million.
Given the critical need for cybersecurity, management believes CrowdStrike’s addressable market will reach $38.7 billion by 2023. But the industry is also expanding quickly. For instance, CrowdStrike recently launched Falcon Horizon, a software module focused on proactively fixing misconfigurations across multi-cloud environments. This product, along with the company’s other cloud security solutions, could add another $10 billion to CrowdStrike’s market opportunity over the next two years.
Unlike many rival products, CrowdStrike’s Falcon platform was built in the cloud, allowing the company to crowdsource (that’s where CrowdStrike gets its name) and analyze massive amounts of data using artificial intelligence. This helps CrowdStrike predict and block even the most advanced cyberattacks. Put simply, the Falcon platform provides clients with industry-leading threat detection.
In fact, research firm Forrester recently recognized CrowdStrike as a leader in the endpoint detection and response market. And while Microsoft was also recognized as a top choice, investors should note that Microsoft was compromised during the SolarWinds cyberattack last year — CrowdStrike was not, though hackers did attempt to breach its defenses.
Not surprisingly, CrowdStrike’s best-in-class solution has been in high demand, driving rapid customer and revenue growth.
|Metric||2018||Q3 2021 (TTM)||CAGR|
|Revenue||$118.8 million||$761.6 million||97%|
As the world becomes increasingly digital, the number of connected devices will continue to grow. In fact, according to CrowdStrike, more than 127 devices are added to the internet every second. And as devices multiply, hackers have more potential targets to attack.
In the coming years, that trend should send CrowdStrike’s Falcon platform soaring to new heights. And as the company spreads its wings, I believe investors stand to benefit greatly.
2. PayPal: Powering digital payments
PayPal’s platform connects merchants and consumers around the globe, facilitating digital transactions both in stores and online. But the fintech company also provides other products, like mobile wallets (PayPal, Venmo) and payment cards that allow consumers to transfer funds, spend money, and even purchase cryptocurrency.
In recent years, as e-commerce has become more popular, so have digital payments. According to eMarketer, online retail sales have increased from $1.7 trillion in 2015 to $4.3 trillion in 2020 — roughly 21% growth each year. And the pandemic has only accelerated that shift, making things like online shopping, digital wallets, and contactless payment options even more popular.
These changes have been the growth engine behind PayPal’s business. In fact, over the last five years, PayPal’s active accounts have doubled, and the total payment volume (TPV) processed on its platform has more than tripled. In other words, PayPal is not only growing its user base, but it is also more effectively monetizing each user. That combination has resulted in strong financial performance.
|Revenue||$9.2 billion||$21.5 billion||18%|
|Free cash flow||$1.8 billion||$5.0 billion||22%|
During PayPal’s recent investor day, management estimated the company’s addressable market at $110 trillion in TPV. For reference, PayPal’s TPV was $936 billion in 2020 — less than 1% of its market opportunity. But in the years ahead, as e-commerce and digital payments become increasingly common, PayPal should continue to gain market share. And that should translate into big gains for shareholders.
A final word
One of the most valuable lessons I’ve learned as an investor is this: Investing requires a long-term mentality. Stock prices can change quickly and dramatically, and if you buy a stock with the expectation that it will double in a month or a year, you’ll probably be disappointed. Sure, it could happen — but predicting exactly when a stock will double is impossible.
Instead, investors should adopt a long-term mindset and focus on finding businesses capable of strong, consistent growth — businesses like CrowdStrike and PayPal. Those are the kinds of investments that can double your money (and more) if you’re patient.
This article represents the opinion of the writer(s), who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennewine owns shares of CrowdStrike Holdings, Inc. and PayPal Holdings. The Motley Fool owns shares of and recommends CrowdStrike Holdings, Inc., Microsoft, and PayPal Holdings and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
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