These future relevant companies have excellent long term potential in expanding markets, but why should you buy now and hold forever?
Oct. 17, 2020
These three companies are providing solutions for their customers in what is an increasingly digital world. Each business’s stock has at least doubled year-to-date, but with demand for services increasing, there is a long runway for growth. Don’t make the common mistake of thinking you’ve missed the boat.
CrowdStrike is a cybersecurity company based in California that was founded in 2011 and went public in June 2019. Since its launch, it has been involved in high-profile investigations into many different data breaches, including the Sony Pictures hack in 2014. CrowdStrike describes itself as a “category-defining cloud platform”, and boasts roughly 50% of the Fortune 100 as customers.
CrowdStrike is benefitting from the acceleration of cloud data growth and rise in secure data needs as a result of COVID-19; even before the pandemic there was a 67% increase in security breaches since 2014. CrowdStrike is forecasting that the total addressable market will increase from $26.9 billion in 2020 to $31.9 billion.
CrowdStrike has been firing on all cylinders with Q2 revenue increasing 84% year-over-year (YoY) to $199 million. Subscription revenue accounted for 92% of total revenue in the latest quarter, up 89% in the same period, while CrowdStrike also added 969 new subscription customers in Q2, bringing its total to 7,230. It has managed to hold a dollar-based retention rate of 124% along with an increasing gross margin of 75% in the last quarter.
CrowdStrike trades at roughly 47 times price to sales which is high; however, investors often have to pay up for quality.
Sea Ltd is an internet platform company that operates three divisions: Garena in digital entertainment, Shopee in e-commerce, and SeaMoney in digital financial services. The company is a market leader in Southeast Asia, which has roughly 600 million inhabitants.
Garena is its only profitable division, accounting for over half of total revenue. In Q2, it reached a record half a billion active users, up 61% YoY. Sea continues to monetize this segment and quarterly paying users have reached 10%, an increase of 91% from the year previous. This increased spend on gaming is a global trend that is likely to remain in a post-COVID-19 world. In the latest quarter revenue increased by 61% YoY to $716 million, driven by the strong performance of its flagship game ‘Free Fire’.
Shopee is the leading e-commerce solution in Southeast Asia by gross merchandise volume (GMV) and, in the latest quarter, it increased by 110%, exceeding $8 billion. This division continues to grow, rising 187% in the past year due to network effects with increased buyers and sellers. In Q2, total payment volume was $1.6 billion, with total paying users exceeding 15 million. In a market where a large portion of the population is unbanked, there is a massive runway for growth.
Fastly is a cloud computing services provider founded in 2011 by co-founder and current CEO Joshua Bixby. The company’s services speed up the delivery of data through its edge computing and content delivery network (CDN). This enables other companies to handle traffic on websites and apps to allow frictionless performance.
It is benefiting from a large and expanding total addressable market due to the digital transformation brought on by COVID-19. Management estimated in its S-1 in 2019 that the market for edge-computing and CDN is expected to be valued at $35.8 billion by 2022, growing at a CAGR of roughly 25%.
Fastly has high-profile customers, such as TikTok, Shopify, and Pinterest, and has a customer satisfaction score of 95%, and a net promoter score of 64. These numbers are nearly unheard of and are better than companies such as Apple. In Q2 2020, Fastly grew customers to 1,951 from 1,837 from the prior quarter, its largest increase since going public. The average enterprise customer spend was $716,000 in Q2 up from $642,000 in Q1 2020, along with a net retention rate of 138%. To top off a strong quarter with revenue growth of 62% YoY, management also raised guidance for the fiscal year.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.