The market has hit investors lately, especially tech ones. heavy technology Nasdaq Composite Index it hit all-time highs in November, then fell precipitously over the next few months, only to bounce back a bit recently. Even though stocks seem to be trading all over the place, savvy investors know that buying stocks in any market condition is a winning strategy.
Given that backdrop, we asked three longtime Fool.com contributors what stocks they recently bought. They bought or added positions in MongoDB (MDB 2.45% ), Year ( YEAR 0.23% )and eight ( OKTA -1.44% ). Let’s see why.
MongoDB: The Steroid Database
Danny Vein (MongoDB): Once upon a time, the database’s ability to organize data into rows and columns was a revolutionary way to store, organize, and find information. Decades later, however, the Structured Query Language (SQL) database standard is getting a bit long.
These days, data is messy and it’s impossible to squeeze everything into neat little columns and rows. That’s where MongoDB comes in. The company offers a complete cloud centric database that can store and organize data of all kinds, including photos, videos, social media posts, audio clips, and even entire documents, while providing the search capabilities of its predecessor plus the aforementioned rows and columns .
MongoDB operates a freemium service that allows developers to download and use the most basic version of its product, which has now been downloaded more than 240 million times since its introduction in 2009. Once developers experience the ease of use of this base modern cloud database, many Sign up for Atlas, MongoDB’s fully managed database-as-a-service (DBaaS) product.
The company’s client list includes many of the most recognizable names in technology, including Adobe, eBay, Alphabetand ciscoto name a few.
MongoDB’s popularity is shown in its financial results. For fiscal year 2021 (ended January 31, 2022), revenue grew 48% year over year, increasing to 56% in the fourth quarter. Atlas continues to shine, growing 85% in Q4, accounting for 58% of total MongoDB revenue and exceeding $1 billion in annualized revenue.
Its rapidly growing number of clients is driving this strong performance. MongoDB added more than 2,000 clients in Q4, bringing the total number of clients to 33,000, up 33% year over year. But even that doesn’t tell the whole story, as the company’s most valuable customers are growing the fastest.
Customers who spent at least $100,000 in annual recurring revenue (ARR) increased 34%, while those who spent $1 million or more increased 67%. In addition, the company’s net ARR expansion rate, which reflects increased spending from existing customers, remained above 120%, a metric it has achieved each and every quarter for over 3 years.
Digital transformation is ongoing and data storage needs will continue to grow exponentially. The database software market peaked at $71 billion in 2020, and management estimates it will grow to $97 billion by 2023. MongoDB revenue grew to $874 million last year, which helps illustrate the magnitude of the remaining opportunity.
MongoDB was crushed by the recent recession. When I bought the stock about two weeks ago, it was down 45% from its recent high. Even after the crash, it’s not cheap by traditional valuation metrics, with a price-to-sales ratio of 32. That said, given its steady above-average growth and huge total addressable market, it was a bargain I couldn’t afford. let pass
Roku: The hype I finally had to add
The main reason is that I see Roku as the future of television, at least in North America. Streamers want a core operating system (OS) that aggregates streaming channels, while advertisers are looking for a platform to show TV ads to an audience that has steadily abandoned broadcast media and cable TV.
Roku addresses both of these challenges through its Roku OS and low-cost streaming devices. Consequently, it claimed 60 million active accounts in the fourth quarter, a net increase of 9 million from prior year levels. Additionally, Roku’s operating system is now the #1 TV ad platform in North America, according to Conviva.
Another reason I bought Roku is that it continues to dispel my doubts. When I first heard about Roku, I saw it as a hardware company with no competition. However, it later leveraged its audience to launch an advertising business, giving it the competitive edge that powers Roku today. I also doubted the strategy of abandoning its channel neutrality and launching the Roku Channel. However, the Roku Channel has become one of the top five channels on the platform without detracting from its appeal, reinforcing Roku’s leadership vision.
True, some concerns remain on the international front. popular channels like Netflix and DisneyDisney+ has expanded around the world faster than Roku. This has created an opportunity for advertising platforms created by Amazon, Samsung, and others. Still, expansions in Europe and South America could generate significant market share.
Investors are also concerned that supply chain constraints and the end of pandemic lockdowns will slow Roku’s growth. In fact, the company forecasts 35% revenue growth in 2022, up from 55% in 2021. Still, these headwinds should prove temporary, keeping Roku on a growth trajectory.
Also, investors can buy Roku at a deep discount, mainly because of these challenges. The current price is more than 70% below its 52-week high. Also, the price-to-sales ratio of seven is near a three-year low. These metrics and the company’s advertising business made Roku too attractive an opportunity to miss.
Okta: The Identity Management Specialist With Massive Growth Ahead
Brian Withers (Oct): Okta has been in the news lately, but not for a reason that excites investors. The company suffered a data breach and did not do a good job of communicating with customers and shareholders. Also, the company seemed to be late. and lacking in their approach to handling the problem.
I believe that the company will learn from this event and management will take the necessary steps to be more responsive and responsible in the future. The stock market has taken a hit and, despite everything, I think now is a good time to join this leader in identity management. In fact, I recently added more to my personal portfolio. Let’s see why.
The company is growing like crazy and winning with customers, but the recent acquisition of a key competitor, Auth0, is driving up costs. Revenue in the last two years has more than doubled, including Auth0 revenue in the most recent quarter. Customers are flocking to the platform and expanding their use of critical infrastructure software. Customers spending more than $100,000 have more than doubled in the last two years. There are a whopping 197 customers spending over $1 million a year, which is an increase of 137% over the last two years.
2 year change
Customers with an annual contract value >$100K
Despite all the good news on the top line, the company is losing money at a faster rate. The company’s net loss of $241 million is 63% of revenue, meaning it spent 163% of all the money it brought in. This is double the loss rate of the last two periods of the fourth quarter. This has scared investors. The key reason for the cost increases is related to the recent acquisition of a key competitor. Integrating two companies is difficult, and not even a year has passed since the acquisition was closed last May. This added expense is likely to ease over time as management moves through the integration process. Given its $2.5 billion in cash and short-term investments, the company has plenty of fuel to continue to invest in growth and enable it to finish the integration work.
I have been an Okta user at two different companies. I can’t imagine going back to the old way of having to manage numerous individual login passwords instead of Okta’s simple, single login process. The situation is even worse for the IT team trying to manage access for all users in a massive enterprise without a centralized platform to do so. As businesses move their workloads to the cloud, Okta is becoming the critical interface for managing identity and access rights for large organizations.
Given the company’s long growth path ahead, I recently added to my position. If you join me in buying some shares today, I imagine five years from now, you’ll look back on this move as smart.
This article represents the opinion of the author, who may not agree with the “official” recommendation position of a premium Motley Fool advisory service. We are motley! Questioning an investment thesis, even one of your own, helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.