2018 was a year we’d all like to forget. And so far, 2019 isn’t looking much better.
While there’s plenty to fear with stocks right now, there are some overlooked growth stocks that deserve some attention and are worth a look now while they are down with the rest of the market.
Here’s what you need to know about two of these overlooked growth stocks.
Salesforce.com (NYSE: CRM)
Salesforce.com (NYSE: CRM) is the largest cloud-based customer relationship management (CRM) services provider in the world, and is one of the originals in the cloud computing space that kick-started the massive move away from storing data in desktop boxes.
With its growing list of available tools that lure businesses to join its platform, annual revenue growth has never dipped below the double digits, with its year-over-year revenue growth of 26% and year-over-year net income growth of 386%.
What’s particularly impressive about this is that the company isn’t slowing down. In the first three quarters of 2018, operating profit and adjusted earnings per share were up 64% and 92%, respectively. And Salesforce’s founder and CEO, Mark Benioff, says that there are years of similar growth left as the pace of digital transformation worldwide continues unrelentingly.
The beauty of Salesforce is that once customers are won over with the company’s various business offerings, they stay on the platform and gradually expand their use of all of the tools Salesforce has available. Thus, once they are on the platform, they don’t leave which creates recurring profits.
Thirty-three analysts rate CRM a Buy and the average price target for the stock is $169.47, indicating possible upside of 29.96% over the next twelve months. Citigroup (NYSE: C) recently boosted their price target to $183 – nearly 41% higher than Thursday’s closing price.
Zuora (NYSE: ZUO)
“We believe the combination of end-market growth, strong competitive positioning, conservative estimates, and valuation create an entry point that has been historically attractive to similar growth SaaS peers,” Berg wrote in a note to clients. “We believe Zuora to be the proverbial baby in the bath water, as its fast yet sustainable secular greenfield growth is getting thrown out with short-term, high replacement cycle growth.”
The stock debuted in August 2018 with an initial IPO price of $20. Shareholders have been on a wild ride since then as the stock soared as high as $37 and now sits at $17 per share as Wall Street continues to punish the stock despite strong earnings reports.
Zuora dominates in a strategic niche where it offers a host of solutions to help companies shift to the complicated accounting of moving to subscription-based businesses. Once on the platform, these companies come to rely heavily on Zuora’s products—much like with Salesforce—which equals sustained recurring subscription revenues as well as prohibitively high switching costs.
Customers also tend to add additional services over time. These add-ons not only contribute to additional sales, but are also made without requiring a sales team as the customers are already on the Zuora platform.
Zuora’s dollar-based customer retention rate is currently at 115%. So, not only are customers sticking with the platform, but they are also adding more products over time. The company has also increased its number of clients with $100,000 annual contracts to 504, up from 292 in 2016.
The average analyst price target for ZUO is $26.40, suggesting possible upside of 49.32% over the next twelve months. Jefferies recently boosted its target price for the stock to $35 – 98% higher than the current price.