The technology sector could be a good bet for investors looking to create long-term wealth. Companies in this highly disruptive industry generally have an asset-light model that can benefit from high operating leverage.
Here, we look at three top tech stocks in Snowflake (NYSE: SNOW), Sea Limited (NYSE: SE), and Twilio (NYSE: TWLO) and analyze why they could be part of your growth portfolio today.
This article was originally written by MyWallSt. Read more insights from the MyWallSt team here.
A company valued at a market cap of $107 billion, Snowflake provides a cloud-based data platform for enterprises. Snowflake has grown its top-line at a stellar pace and has increased revenue from $96.66 million in fiscal 2019 to $592 million in fiscal 2021 that ended in January.
Wall Street expects sales in fiscal 2022 to almost double to $1.15 billion while its forecast to grow by 64% to $1.88 billion in fiscal 2023.
The company ended fiscal Q2 with a customer base of 4,990, which was 60% higher than the year-ago period. Comparatively, the number of customers that spend more than $1 million each year on the Snowflake platform rose by 107% to 116. Snowflake’s net retention rate in Q3 stood at 169%, suggesting existing customers increased spending by 69% in the last year.
The company’s gross margin has increased to 73%, up from 63% in the year-ago period. This expansion in profitability will allow Snowflake to post a positive free cash flow by the end of fiscal 2022.
Snowflake continues to spend heavily on sales and marketing as it is looking to rapidly expand its customer base, which will drive top-line growth higher in the future.
A cloud communications company, Twilio is valued at a market cap of almost $50 billion. In the third quarter of 2021, Twilio reported sales of $740 million which were 65% higher than the year-ago period. It ended Q3 with 250,000 active customer accounts and a net dollar retention rate of 131%.
Twilio emphasized that its top 10 customers account for just 11% of revenue in Q3 of 2021, down from 15% in Q2 of 2020.
The company has increased sales from $399 million in 2017 to $1.76 billion in 2020. Wall Street expects sales to grow by 57% to $2.77 billion this year and rise by another 32% to $3.65 billion in 2022.
Twilio stock has returned close to 1,000% since its IPO in June 2016 but is also down 37% from record highs, allowing you to buy the dip.
3. Sea Limited
One of the largest e-commerce companies in Asia, Sea Limited also derives revenue from high-growth verticals such as gaming and fintech.
SE stock was listed on the NYSE in October 2017 and has since returned a staggering 1,740% to investors in the last four years, easily dwarfing the broader markets.
Despite these market-thumping gains, Sea Limited has enough room to keep outpacing its peers as the company is forecast to end 2021 with $9.16 billion in sales, indicating an annual growth rate of 106% since 2018.
Like most other growth stocks, Sea Limited remains unprofitable as it sacrifices the bottom line for revenue growth. But Wall Street expects its loss per share to narrow from $2.78 in 2020 to $1.01 in 2022.
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