THE Nasdaq-100 the index hosts 100 of the largest technology stocks listed on the Nasdaq exchange. The index is up 19.7% to start 2023, which is a great showing so far, but it’s still down 21% from its all-time high. This means that it is still firmly in bearish territory. But historical data suggests he might not be here for much longerand the start of a new bull market could very well happen this year.
If so, now may be the time for investors to prepare their portfolios. This could mean buying new stocks, but also selling some that may not be designed for long-term success. With that in mind, here are two growth stocks to buy now and one to sell.
The first stock to buy: SentinelOne
Cybersecurity has become a critical expense for most businesses, especially those that rely heavily on cloud computing technology. SentinelOne (S 7.21%) is one of the fastest growing players in the industry – it has more than double its revenue in fiscal year 2023 (ending Jan. 31), but its stock remains 80% below its all-time high.
This could be an opportunity for investors. SentinelOne has built an all-in-one solution called Singularity, which allows organizations to view their entire cybersecurity stack on a single pane of glass. It reduces communication breakdowns between departments and, combined with the artificial intelligence (AI) technology, results in faster and automated incident response times.
Singularity protects the entire cloud, endpoint, and identity sphere, and focuses on automated protection because it believes AI can make better decisions than humans. The strategy appears to be resonating with SentinelOne’s 10,000 customers, as its net revenue retention rate rose to 130% in the fourth quarter of fiscal 2023 from 125% a year ago. This means existing customers are spending 30% more with the company than they did at the same time in fiscal year 2022.
SentinelOne grew its annual revenue by 817% in just three years, from $46 million in fiscal year 2020 to $422 million in fiscal year 2023. But it barely scratched the surface. surface of what he estimates to be a $100 billion market opportunity. Considering the sharp reduction in its share price at the moment, it could be a the perfect time for investors to buy before the next bull market.
The second stock to buy: Snowflake
Cloud computing has unlocked unprecedented scale for businesses of all sizes. This allows them to access a powerful digital infrastructure at a lower cost and create new online sales channels to serve a global customer base. But it has a byproduct that many organizations struggle to manage: data. Every customer interaction, for example, produces important information, but extracting its value can be difficult.
SnowflakeIt is (SNOW 8.57%) Data Cloud enables businesses to aggregate all their data in one place, giving them a powerful analytics engine so they can get the most value from the insights they generate. It is especially useful for large organizations using multiple cloud service providersthat create data silos and hinder visibility.
Snowflake is also working to disrupt the app development industry with its Snowpark tool, which brings programmers together on a single platform, regardless of the language they code in. It ensures data is securely stored in one place, improves collaboration, and has the potential to speed up project development.
Snowflake’s revenue for fiscal 2023 (ended Jan. 31) was $1.9 billion, up 70% year-over-year. But investors were concerned about its forecast, which suggests growth could slow to 40% in fiscal 2024. The company hired 1,892 employees in fiscal 2023, suggesting any slowdown in growth. may only be temporary.
With Snowflake stock down 65% from its all-time high, this could be a great buying opportunity, especially in the long run.
Stock for sale: DoorDash
Just as investors should be looking for quality stocks to buy before the next bull market, they can also look to reduce their exposure to stocks that may not perform well in the future. DoorDash (DASH 2.88%) could be one of them. The company operates in the food delivery industry, which is awash with competition, and the effects are being felt in its bottom line.
THE food delivery the industry has low barriers to entry, so it is relatively inexpensive for new competitors to enter the space. As a result, lower prices are one of the few levers DoorDash can pull to maintain its 65% market share in the United States.
The good news is that DoorDash managed to accelerate revenue growth to 40% year-over-year in the fourth quarter of 2022, thanks in part to its acquisition of retail delivery platform Wolt. But the company continues to struggle with large net losses, which show no signs of recovery.
DoorDash’s gross profit margin fell to 42% in the fourth quarter from 49% a year ago, leaving the company with less money to spend on operating expenses. As a result, its net losses have steadily worsened in each quarter of 2022, blowing to $642 million in the fourth quarter. That was partially impacted by a one-time $312 million impairment charge, but even after discounting its fourth-quarter result was still the worst of the year.
Consumers are grappling with a difficult economic environment and will likely remain cost conscious as long as inflation and interest rates remain high. Since delivery is usually the most expensive option when it comes to ordering takeout, DoorDash could find itself with a drop in demand to go along with its financial difficulties. Therefore, this might be a stock to avoid even if a new bull market starts in 2023.