While 2020 may have convinced some investors that tech stocks are overpriced, an unbiased look reveals a different story. Some of the best growth stocks are actually well worth their ratings. Some are even still attractive.
Two growth stocks that are still strong buys are Twilio (WKN: A2ALP4) and Facebook (NYSE: A1JWVX). Twilio’s business is growing incredibly fast, driven by impressive customer metrics. In the meantime, Facebook has grown to be one of the most impressive cash cows in the tech sector.
Here’s a closer look at these two companies.
The cloud-based communications specialist Twilio may seem expensive. The company boasts a market capitalization of approximately $ 70 billion despite having less than $ 2 billion in revenue in the past twelve months. But the company’s financials easily do justice to the high price tag. Twilio’s recently released fourth quarter results make this clear.
Twilio recently reported fourth quarter revenue of $ 548.1 million, up 65% year over year. That was a significant acceleration from the 52% growth in Q3 2020. Even if you factor in the additional $ 23 million in revenue the company made in the fourth quarter from a recent acquisition, Twilio’s revenue compares increased by 59% compared to the previous year. This was the second quarter in a row of accelerated growth. The technology company is seizing “the opportunity of a new generation”, as Twilio co-founder and CEO Jeff Lawson put it.
Twilio’s momentum is due to both strong customer growth and an impressive improvement in spending from existing customers. The total number of customers rose from 179,000 in the same quarter of the previous year to 221,000. Spending by customers who joined Twilio a year ago increased 39%.
While Twilio stock has risen sharply following the fourth quarter report, there is likely still plenty of room for improvement for the stock over the long term. Though probably every now and then with some big fluctuations.
While Facebook’s sales growth of 21% in 2020 is certainly not as impressive as Twilio’s sales growth of 55% last year, the stock has a particularly attractive valuation. With sales of $ 85 billion in 2020, Facebook had net income of $ 29 billion. That net income rose from less than $ 19 billion in 2019.
In addition, the social network business is supported by one of the strongest network effects in the world. Through its family of social networks – Facebook, Messenger, WhatsApp, and Instagram – the company has 2.6 billion daily active users. And this user base continues to grow strongly. In 2020, these daily active users increased by 15% compared to the previous year.
Despite its attractive profitability profile and strong growth, Facebook is only trading for 27 times its profit. While management expects to face some ad targeting challenges in 2021 and beyond. But Facebook’s lucrative business model and its huge user base give the social network a solid foundation. Even in an evolving digital advertising landscape, there are ways to grow sales and profits.
Both stocks look attractive at their current prices and offer investors an opportunity to buy promising growth stocks. And that even after the big increase in 2020.
There’s one company whose name is very, very popular with analysts at The Motley Fool right now. For us it is THE top investment for 2021.
You could benefit from it too. To do this, you first have to know everything about this unique company. That is why we have now put together a free special report that presents this company in detail.
The Motley owns shares of and recommends Facebook and Twilio. Daniel Sparks has no position in any of the stocks mentioned. This article was published on February 14, 2021 on Fool.com and has been translated for our German readers.
Motley Fool Deutschland 2021