This e-commerce titan offers massive opportunity at a discount.
A burgeoning commercial sector and rising net dollar retention should boost this analytics specialist.
The CEO for this no-code software platform says, “we see literally no competition.”
Tech investors have been gritting their teeth as many of their favorite stocks have sold off considerably since November. The tech-heavy Nasdaq Composite index is down more than 15% off its high, but that figure doesn’t tell the tale of what is happening to individual investors.
The Nasdaq index is weighted by market cap so larger companies (which are typically less volatile) can help reduce the impact of broad downturns. For instance, Apple and Microsoft , which make up more than 20% of the index, are down only 10% and 16% off their highs respectively, whereas many smaller market cap tech companies are down 40%, 50%, or even more from their recent highs.
Given the state of the market today, we asked three longtime Fool contributors to pick their favorite software-as-a-service (SaaS) stock that they would buy right now, without hesitation. They picked Shopify ( NYSE:SHOP ), Palantir ( NYSE:PLTR ), and Monday.com ( NASDAQ:MNDY ). Image source: Getty Images. Shopify: Throwing the baby out with the bathwater
Danny Vena (Shopify): Given the significant sell-off that has plagued tech stocks in recent months, the market is offering up plenty of fast-growing online retail companies at a discount. Evidence suggests that this could represent a massive opportunity for savvy investors.
Even after hitting record levels in 2021, worldwide e-commerce sales are expected to climb to $5.5 trillion in 2022, rising to $7.4 trillion by 2025. Perhaps more impressive is the fact that nearly 20% of every retail dollar spent in coming years is expected to come from digital retail. This illustrates the large and growing opportunity for Shopify.
The company’s software-as-a-service (SaaS) platform is the leading provider of digital retail solutions for merchants. Furthermore, what began as a way for small- and medium-sized companies to join the e-commerce revolution quickly expanded to include enterprise-level businesses as well.
Shopify provides merchants with all the cloud-based tools they need to set up and maintain an online retail operation. This includes simple things like setting up a website and more complex solutions like helping merchants consolidate sales from across multiple channels, including social media, web, mobile, online marketplaces, and can even brick-and-mortar stores.
The company provides solutions to simplify many of the day-to-day chores necessary to succeed, including inventory, payments, product management, shipping and fulfillment, and even working capital loans for qualifying merchants.
Given the stock’s 66% plunge since mid-November, you might be tempted to think Shopify’s business is in trouble, but that’s simply not the case. With the S&P 500 and Nasdaq Composite both in correction territory, some investors have abandoned many high-growth stocks in search of safe havens — but the selling has simply gone too far.
Consider Shopify’s recent results. Revenue grew 57% year over year in 2021, an impressive feat considering that was on top of a 96% increase in 2020, fueled by the pandemic. It’s also telling that gross profit grew 61%, outpacing revenue growth, as the company leveraged its growing scale. At the same time, adjusted net income surged 66%.
Shopify boasts a base of more than 1.7 million merchants, but this could be just the beginning . The company generated revenue of more than $4.6 billion last year, but that pales in comparison to Shopify’s total addressable market, which management estimates at roughly $153 billion.
Giving its industry-leading solutions, growing addressable market, and the secular tailwinds fueling accelerating e-commerce adoption, investors would do well to buy Shopify now, before the market realizes its oversight. Image source: Getty Images. Palantir: Investors should consider targeting this analytical insight company
Will Healy (Palantir): Palantir is the SaaS stock taking data analytics to a new level. Its Apollo operating system is a tool designed to make analytical insights. This functionality helps it to stand out from Snowflake , which seeks to collect data, or Alteryx , which focuses on data processing and presentation. Due to these differences, Palantir does not have a true competitor.
Knowing this, it has applied Apollo to two different software systems, each targeting different markets. The Gotham system delivers analytical insights in the national defense and law enforcement realms. Analysts credit Gotham with finding Osama bin Laden, among other successes.
Palantir’s Foundry system differs in that it seeks to apply these capabilities to drive business-related initiatives. The transition to a commercial focus may have brought some uncertainty to the stock. […]