Last year, the U.S. stock market did nicely. The tech-heavy Nasdaq Composite rose 39%, the broad-based S&P 500 28%, and the blue chip Dow Jones Industrial Average 18%. Despite budget constraints, patient investors can acquire. Given their growth potential, Cloudflare (NYSE: NET) and Shopify (NYSE: SHOP) trade at acceptable prices, with both companies trading below $100 per share.
Cloudflare specializes on cloud computing. A variety of application, network, and security services from Cloudflare accelerate and safeguard corporate infrastructure and applications in private and public clouds. Workers, its development platform, provides computing and storage resources to help organizations build and execute apps on its network.
Cloudflare's speed and size have helped it dominate various verticals. It handles 20% of web traffic on the fastest cloud network. That last point has a major network effect. Using massive volumes of internet data, its platform's machine learning models are constantly improved to route traffic and block threats.
The fourth quarter was strong for Cloudflare. Customer numbers jumped 17% to 189,791 and average spending increased 15%. In turn, revenue rose 32% to $362 million and non-GAAP net income 148% to $53 million. Management reported higher closing rates and average transaction sizes than the prior quarter, indicating sales force efficiency improvements.
In the future, Cloudflare has promising developer and network security offerings. Forrester Research and International Data Corp. have named the company a leader in edge development platforms and zero-trust network access, citing threat-detection capabilities.
Edge computing is anticipated to expand 37% annually until 2030, while zero-trust security is expected to rise 17% annually. Wall Street expects revenues to rise 25% yearly for five years. With that estimate, Cloudflare's 25 times sales valuation seems reasonable. Today, patient investors should buy a small position in this growth stock, knowing that shares may be volatile.
Shopify 2. Shopify helps retailers manage their physical and online stores using software and services. It integrates with Amazon, TikTok, direct-to-consumer websites, and mobile apps. Additional services include finance solutions, fulfillment support, and cross-border and wholesale tools.
Shopify outperformed sales and profit forecasts in the fourth quarter. Subscription and merchant services revenue boosted sales 24% to $2.1 billion. Spending cuts and the sale of its capital-intensive logistics company boosted non-GAAP net income to $441 million, quadrupling.
Light forecast caused Shopify shares to fall after the fourth-quarter report, but investors should buy. Shopify is the second-largest U.S. e-commerce company and the leader in omnichannel commerce software. As online spending rises, Shopify is well-positioned to capitalize. In 2023, the Fortune Future 50 List, which ranks the world's largest firms by long-term growth, placed the company 16th.
The enterprise-grade Shopify Plus platform now supports wholesale e-commerce. Its addressable market grows thrice because wholesale e-commerce sales outweigh retail sales. While it's too early to judge, Shopify's wholesale sales rose about 150% in the fourth quarter last year.
Grand View Research predicts 11% yearly growth in retail e-commerce sales and 18% in wholesale sales until 2030. Wall Street expects Shopify to grow faster. Overall, analysts expect 22% annual revenue growth over the next five years. Considering that, its 14 times sales valuation looks realistic. Today, patient investors might buy a tiny investment in this growing stock.
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