Albert Einstein once said compound interest is the most powerful force in the universe. That means something coming from one of the greatest physicists of all time, and he’s absolutely right. As an investor, I know that few things are more satisfying than watching a stock multiply in value.
According to IBM, the average cybersecurity breach inflicts $4.2 million in damages, in large part consisting of lost business in the wake of the attack. Unfortunately, digital transformation has made these costly events more common. The rise of cloud computing, the shift to remote work, and the proliferation of connected devices have all given hackers more ways to launch attacks.
To that end, CrowdStrike has become a gold standard in cybersecurity. Its platform protects devices such as desktops and servers, as well as workloads such as cloud services and applications. To do this, CrowdStrike leverages the power of the public cloud to crowdsource massive amounts of data, making its artificial-intelligence models uniquely effective in detecting and preventing threats.
In fact, the International Data Corporation (IDC) recently recognized CrowdStrike as the market leader in endpoint protection. The IDC also named CrowdStrike’s Falcon Complete the best managed detection and response service on the market, citing greater capabilities and a stronger strategy than any rival.
This dominance is further evidenced by strong customer demand. Earlier this year, CrowdStrike became the third fastest software-as-a-service vendor to reach $1 billion in annual recurring revenue, behind only Salesforce.com and Zoom, both of which are CrowdStrike customers.
Looking ahead, CrowdStrike puts its market opportunity at $106 billion by 2025, 96 times its trailing-12-month revenue of $1.1 billion. And management is executing on a strong growth strategy. In the past year, CrowdStrike has launched several new modules — Falcon Horizon, Falcon X Recon, and Falcon Forensics — extending the functionality of its platform. The company also acquired Humio and Preempt Security, adding new modules for log management and identity protection.
Collectively, these make CrowdStrike a more comprehensive solution, reinforcing its best-in-class status. That’s why I think this growth stock could jump fivefold in the next 10 years.
Modern enterprises have access to more data than ever before. But digital transformation has multiplied the number of applications businesses rely on each day, and that data is often spread across siloed systems. To resolve this matter, developers have built data pipelines for mobility, data lakes for storage, and data warehouses for analytics, but these point solutions just make things more complicated.
That’s why Snowflake pioneered the data cloud, a network that connects thousands of organizations and their data, providing all the functionality of legacy point solutions through a single platform. Snowflake helps enterprises integrate, analyze, and govern data, enabling clients to make more informed decisions, build data-driven applications, and securely share data inside and outside their organization.
In 2019, Snowflake launched its data marketplace, a platform where companies can easily monetize and acquire data sets. This platform creates a network effect: As Snowflake adds new clients, more data can be exchanged through its marketplace, enhancing the value for all users. And that’s exactly what’s happening. As of the second quarter, 656 data sets were listed on the marketplace, up 32% sequentially and 73% since the end of 2020.
In short, Snowflake helps its clients manage and make sense of big data. That’s why this company is growing like wildfire.
Q2 2020 (TTM)
Q2 2022 (TTM)
Also noteworthy, Snowflake’s retention rate hit 169% in the most recent quarter. In other words, the average client spent 69% over the past 12 months compared with the prior period, evidencing the immense utility of Snowflake’s data cloud.
Looking ahead, management believes product revenue will reach $10 billion by fiscal 2029, implying annualized revenue growth of 44%. But even then, Snowflake will have hardly made a dent in its $90 billion market opportunity. That’s why I think this growth stock could multiply fivefold in value over the next decade.
This article represents the opinion of the writer, 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.