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As we enter a new year and many investors reflect on the stock market’s performance over the past year and what it means for the future, there is much to be thankful for. After suffering its worst performance in over a decade, Nasdaq Composite It returned to strength, rising 43% in 2023.
But with economic growth of this magnitude and uncertainty remaining in the economy, it’s understandable that investors are asking themselves what will happen in 2024. If we look back at history for what will happen next year, we find good news.
The Nasdaq’s first full year of trading was in 1972, and since then, the tech-heavy index has produced an average return of 19% every year following a bear market recovery. Results range from just 7% in 1986 to his 38% in 2013. That said, there’s a good chance the Nasdaq will rise in his 2024 based on the data.
If the Nasdaq skyrockets in 2024, there are two tech stocks you’ll want to have in your portfolio before then.
1. HubSpot: Take your CRM to the next level
hubspot (New York Stock Exchange: Hub) The concept has become synonymous with inbound marketing, thanks to CEO Brian Halligan, who first developed it. This strategy aims to attract potential sales prospects by creating valuable content that customers can find and use.
Rather than bombarding customers with banner ads or flooding their inboxes with junk email, inbound marketing uses social media posts, white papers, blog posts, explainer videos, and infographics to Inform potential customers and attract them to your business.
From those humble beginnings, HubSpot has evolved to offer a full line of customer relationship management (CRM) solutions for small and medium-sized businesses. In addition to marketing, the company now offers sales, service, content management, operations, and commerce tools all from one dashboard. Additionally, HubSpot has integrated artificial intelligence (AI) tools across a wide range of its products, helping users be more productive and generate more relevant content.
Business is going well. In the third quarter, HubSpot’s total revenue increased 28% year-over-year to $558 million. Although the company is not yet profitable as it continues to invest heavily in expanding into new markets, its net loss has been cut by 82% to $5.5 million. Additionally, HubSpot continues to generate strong operating cash flow and free cash flow, suggesting it’s only a matter of time before stable profits are achieved.
Solid financial growth is supported by impressive customer metrics. Total customer count was 194,000, up 22% year over year, and average subscription revenue per customer increased by 3%.
One of the most exciting aspects of the company is HubSpot’s growing opportunity. Management estimates the current market opportunity to be approximately $51 billion, increasing to $77 billion by 2028. The company is expected to generate $2.1 billion in revenue when it closes in 2023, which helps illustrate the size of the opportunity that remains.
The stock is selling for 9 times next year’s sales, so it’s not cheap, but that should be seen in the context of the company’s growth. Over the past 10 years, HubSpot’s revenue has increased by 2,210% and its stock price has increased by 1,770%. As such, the stock price deserves a slight premium.
HubSpot is taking its cloud-native CRM platform to the next level. Investors shouldn’t miss out on this opportunity.
2. Snowflake: Extract value from data
In the past, maintaining the software, data, and other computer systems needed to run a business required a cadre of IT professionals and a dedicated server room. But cloud computing is causing a paradigm shift, and digital transformation suggests this trend will continue. The cloud makes it easy to store and access systems and data, but it also brings challenges. Collecting data and extracting meaningful intelligence from disparate sources becomes increasingly difficult.
snowflake (New York Stock Exchange: Snow) There are answers to those challenges. Not only does it allow users to store their systems and data on their company’s cloud-based systems, it also provides a set of tools to collect and analyze business data for actionable insights.
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, which also increased 34%. Although the company is not yet profitable on his GAAP basis, Snowflake is generating strong operating cash flow and free cash flow, suggesting stable profitability is on the horizon.
Snowflake’s customer metrics further demonstrate its strong foundation. The total number of customers increased by 24% from the previous year to 8,907 companies. The most profitable customers, those on whom he spent more than $1 million in the subsequent 12 months, grew even faster, increasing by 52%. Additionally, a 135% net revenue retention rate indicates that existing customers tend to increase their spending over time.
Management expects Snowflake’s growth to accelerate, forecasting 37% revenue growth to $2.65 billion in 2024 and targeting $10 billion in revenue by 2029. However, Snowflake has just scratched the surface of a huge market opportunity, and management expects it to accelerate further. By 2027, it will grow to $290 billion.
That said, it’s worth noting that investors are pricing in a lot of growth in Snowflake’s sales, trading at 17 times sales, which is near the lower end of its historical range. It may seem expensive, but Snowflake has grown its revenue by over 900% since late 2019, so we think it’s worth the premium.
Should you invest $1,000 in HubSpot right now?
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Danny Vena holds positions at HubSpot and Snowflake. The Motley Fool owns a position in and recommends HubSpot and Snowflake. The Motley Fool has a disclosure policy.
The Nasdaq is likely to soar in 2024.2 Tech Stocks to Buy Before That Originally published by The Motley Fool
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