In early April, I wrote an article speculating that Shopify could be one of the next companies to split its stock. Four days later, the company announced a 10-for-1 stock split. Of course, I had no way of knowing that would happen. More importantly, while my article made a case for buying Shopify, my investment thesis had nothing do with a potential stock split.
Stock splits can certainly excite investors. We’ve seen that happen several times this year. But they don’t directly affect the value of the underlying business. So it’s best to think beyond stock splits when deciding where to invest your money. For instance, metrics like revenue growth and market opportunity are much more important.
With that in mind, here are two supercharged growth stocks worth buying right now.
1. Coinbase: The gateway to the cryptoeconomy
Coinbase Global ( COIN 2.75% ) is best known as a cryptocurrency brokerage for retail investors and financial institutions. In fact, the company operates the largest U.S. crypto brokerage, and it continued to gain market share last year. However, Coinbase also provides solutions for storing, staking, and spending crypto assets, as well as infrastructure services for developers through Coinbase Cloud. In short, the company is a gateway to the cryptoeconomy.
Currently, Coinbase generates the vast majority of revenue through transaction fees, which are based on the price and quantity of the crypto asset being bought or sold. In other words, Coinbase depends heavily on trading volume, and market volatility caused trading volume to skyrocket 766% to $1.7 trillion in 2021. In turn, revenue soared 514% to $7.8 billion, and GAAP earnings jumped 936% to $14.50 per diluted share.
Despite that phenomenal performance, Coinbase has hardly scratched the surface of its full potential. The crypto market is currently worth about $2 trillion — which is a fraction of the $120 trillion global equity market and the $124 trillion global bond market. Going forward, assuming the crypto market continues to grow, Coinbase should benefit from rising transaction fees.
Additionally, its nascent subscription and services business — which generates revenue from staking, institutional cold storage, and infrastructure services — should expand as investors become more enthusiastic about cryptocurrency.
Finally, Coinbase launched a beta version of its non-fungible token (NFT) marketplace in April 2022. Given the excitement around NFTs, CEO Brian Armstrong has said the Coinbase NFT marketplace could be bigger than its cryptocurrency business.
Here’s the big picture: If you believe in the future of the cryptoeconomy, Coinbase is a great way to tap into that trend. Better yet, the stock looks incredibly cheap, as it trades at 4 times sales and 10 times earnings. To put that in perspective, established brokerage Charles Schwab — a company that grew revenue at 34% over the past year (compared to Coinbase’s 514% growth) — trades at 7 times sales and 25 times earnings. To me, that means the market is overlooking Coinbase’s long-term potential. That’s why this supercharged growth stock is a screaming buy.
2. CrowdStrike: The gold standard in cybersecurity
CrowdStrike Holdings ( CRWD 4.36% ) specializes in cybersecurity. Its software-as-a-service (SaaS) suite comprises 22 different modules that range from endpoint security and cloud workload protection to threat intelligence and managed services. More importantly, its cloud native architecture allows it to crowdsource security signals from across its ecosystem of protected devices. Using that information, CrowdStrike leans on artificial intelligence to predict and prevent even the most sophisticated hacks.
To that end, the company has earned a reputation for cutting-edge threat detection. Better yet, it has been recognized as a leader across several verticals of the cybersecurity industry. Forrester Research recently ranked CrowdStrike as the best-in-class solution for endpoint detection and response, and International Data Corp. ranked CrowdStrike a leader in managed detection and response.
Those accolades have translated into supercharged financial results. CrowdStrike grew its customer base 65% to 16,325 in the past year, and the average customer spent 24% more. In turn, revenue surged 66% to $1.5 billion last year, and free cash flow soared 51% to $442 million.
But investors have good reason to believe that supercharged growth will continue. CrowdStrike recently added identity threat protection to its industry-leading managed security offering, Falcon Complete. That’s important for two reasons.
First, nearly 80% of cyberattacks involve compromised credentials, and no other company offers a fully managed identity service. Second, the cybersecurity industry is currently burdened by 3 million unfilled positions, a labor shortage that has likely left many enterprises vulnerable to attack. Falcon Complete allows enterprises to outsource endpoint security, cloud workload protection, and identity threat protection to CrowdStrike’s team of experts.
More broadly, CrowdStrike has an ironclad competitive edge in a market that management values at $126 billion by 2025. That’s why this growth stock is worth buying right now.
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.