As a new year begins, many investors look at the stock market’s performance over the past year and what it means for the future — and there’s a lot to be thankful for. After achieving its worst performance in more than a decade Nasdaq Composite It has returned to its level, rising by 43% in 2023.
However, after an increase of this magnitude and the uncertainty that remains in the economy, investors are understandably asking themselves what to expect in 2024. Looking to history to gain insight into what could happen over the next year reveals good news.
The Nasdaq’s first full year of trading was in 1972, and since then, every year after a bear market recovery, the technology-based index has returned 19% on average. The range of results varies, from just 7% in 1986 to 38% in 2013. However, based on the data, chances are good that the Nasdaq will make gains in 2024.
If the Nasdaq rises in 2024, there are two tech stocks you’ll want to have in your portfolio before that happens.
1. HubSpot: Taking CRM to the next level
HubSpot (NYSE: Axes) It is synonymous with inbound marketing, thanks to CEO Brian Halligan, who first pioneered the concept. This strategy seeks to attract sales leads to businesses by creating valuable content that customers can find and use.
Instead of attacking them with banner ads or flooding their inbox with unwanted emails, inbound marketing uses social media posts, white papers, blog posts, educational videos, and infographics to inform potential customers and entice them into action.
From those humble beginnings, HubSpot has evolved, providing a full suite of customer relationship management (CRM) solutions for small and medium businesses. In addition to marketing, the company now offers sales, service, content management, operations, and commerce tools, all from a single dashboard. Furthermore, HubSpot has integrated artificial intelligence (AI) tools across a wide swath of its offerings, making users more productive and helping them create more relevant content.
Good work. In the third quarter, HubSpot had total revenue that grew 28% year over year to $558 million. The company has continued to invest heavily to expand into new markets, so it is not yet profitable but has cut its net loss to $5.5 million, down 82%. Furthermore, HubSpot continues to generate strong operating and free cash flow, suggesting that consistent earnings are just a matter of time.
Strong financial growth is supported by respectable customer metrics. The total number of customers of 194,000 was up 22% year over year, while average subscription revenue per customer was up 3%.
One of the most exciting aspects of the company is the growing opportunity for HubSpot. Management estimates its current market opportunity at $51 billion, rising to $77 billion by 2028. The company is expected to generate revenue of $2.1 billion when it closes its books in 2023, which helps illustrate the size of the opportunity remaining.
The stock isn’t exactly cheap, selling for 9 times next year’s sales, but that should be viewed in the context of its growth. Over the past decade, HubSpot has increased its revenue by 2,210%, pushing its stock up by 1,770%, so the stock is worth a slight premium.
HubSpot is taking its cloud-native CRM platform to the next level, and investors shouldn’t miss out on this opportunity.
2. Snowflake: extracting value from data
It required a cadre of IT professionals and dedicated server rooms to maintain the software, data, and other computer systems needed to run the business. However, cloud computing has brought about a paradigm shift, and digital transformation indicates that this trend will continue. The cloud makes it easier to store and access systems and data but it also presents challenges. Collecting data from disparate sources and extracting meaningful intelligence becomes more difficult.
Snowflake (NYSE: SNOW) He has the answer to those challenges. Users can not only store systems and data on the company’s cloud system, but it also provides a set of tools to collect and analyze business data, resulting in actionable information.
In the third quarter of fiscal 2024 (ending October 31), Snowflake’s revenue increased 32% year-over-year to $734 million, driven by product revenue that also grew 34%. Although the company is not yet profitable on a GAAP basis, Snowflake is generating strong operating and free cash flow, suggesting consistent profitability on the horizon.
Snowflake’s customer metrics also demonstrate its strong foundation. Its total number of customers increased by 24% year-on-year to 8,907. Its most profitable customers — those spending $1 million or more in the trailing 12-month period — grew the fastest, with a 52% increase. Additionally, a net revenue retention rate of 135% shows that existing customers tend to spend more over time.
Management expects Snowflake’s growth to accelerate, forecasting revenues of $2.65 billion in fiscal 2024, an increase of 37%, and targeting revenues of $10 billion by fiscal 2029. However, Snowflake has only just scratched the surface of its massive market opportunity, which management estimates is It will reach $290 billion by 2027
However, investors have plenty of growth in pricing Snowflake, which is selling for 17 times sales, although it’s worth noting that it’s near the lower end of its historical range. This may seem expensive, but Snowflake has expanded its revenue more than 900% since late 2019, so I suggest it’s worth a premium.
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Danny Fina has positions at HubSpot and Snowflake. The Motley Fool has and recommends HubSpot and Snowflake. The Motley Fool has a disclosure policy.
The Nasdaq is likely to rise in 2024. 2 tech stocks to buy before that happens. Originally published by The Motley Fool