With the Nasdaq Composite Index returning to record highs, investors are circling back to technology stocks as a reliable source of growth and diversification. The idea is that if the bull market still has legs then technology companies will play a major role. This isn’t a stretch: technology stocks have been the stalwarts of the bull market and the primary catalysts of earnings growth in recent years.
Against this backdrop, we offer up two interesting technology plays from the platform category that have experienced massive growth in recent years, Twilio Inc. (NYSE: TWLO) and Etsy Inc. (NASDAQ: ETSY).
- Market Cap: $16.7 billion
- Revenue Growth: 62.9% (December 2018)
- Free Cash Flow: -$17.2 million
Founded in 2008, Twilio has quickly emerged as one of the fastest-growing cloud computing platforms. The company, which only went public three years ago, allows software developers to implement communications functions (call and text) using a web service API.
Twilio’s growth has been truly staggering. In fiscal 2018, it managed to grow its revenue by nearly 63% to $650 million. Since 2013, sales have increased by a whopping 1,200%.
Those gains are well reflected in the stock price. TWLO has returned more than 400% since its IPO. This isn’t all surprising when we consider the investors who were backing the company prior to its IPO. Between 2009 and 2015, Twilio raised hundreds of millions of dollars from the likes of Fidelity, T Rowe Price, Amazon, and Salesforce.
In the most recent quarter, Twilio reported non-GAAP earnings of $0.05 per share, which were slightly higher than the median estimate. First-quarter revenues surged 81% annually to $233.1 million, easily surpassing he median forecast.
- Market Cap: $8.1 billion
- Revenue Growth: 37% (December 2018)
- Free Cash Flow: $143 million
While most investors have heard about Etsy, few have taken the time to fully understand the product or study its impressive growth. With a market capitalization of more than $8 billion, Etsy’s share price has skyrocketed more than 450% in the last two years. Those numbers mirror the company’s impressive revenue growth over the past six years, not to mention a staggeringly high free cash flow of $143 million (this makes future investments in growth through acquisitions possible).
The online platform for handmade niche products has more than two million sellers, over 35 million buyers and roughly 50 million products for sale. The stock is rated favourably by analysts at Goldman Sachs and has been given strong upside potential due to its impressive business model.
Twilio and Etsy are high-flying tech stocks with plenty of upside. Investors who may have already missed the boat on their above-average returns should take comfort in the fact that both companies are expanding rapidly and have yet to hit full stride.
Disclaimer: The author holds no investment position in Twilio or Etsy at the time of writing.
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.