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The cryptocurrency market warmed up again over the past year as the approvals of Bitcoin's (CRYPTO: BTC) spot ETFs (exchange-traded funds) and stabilizing interest rates brought back the bulls. But most cryptocurrencies are still extremely volatile, tough to value properly, and heavily exposed to unpredictable macro and regulatory headwinds.
Therefore, investors willing to take some risk but wanting to invest their cash in actual businesses should take a closer look at high-growth tech companies instead of cryptocurrencies. I personally believe three promising tech stocks -- Datadog (NASDAQ: DDOG), ServiceNow (NYSE: NOW), and Monday.com (NASDAQ: MNDY) -- could generate bigger gains than most cryptocurrencies over the next few years.
1. Datadog
Datadog's cloud-based platform collects diagnostic data from a company's entire software infrastructure in real time. It then aggregates that data onto unified dashboards, which makes it easier for IT professionals to spot potential problems.
From 2019 to 2023, its revenue grew at a compound annual growth rate (CAGR) of 56%, its total number of large customers (who generate at least $100,000 in annual recurring revenue) nearly quadrupled from 858 to 3,190, its adjusted operating margin improved from negative 1.5% to positive 23%, and its annual free cash flow (FCF) grew from $0.8 million to $597.5 million. It also turned profitable on a generally accepted accounting principles (GAAP) basis for the first time in 2023.
Datadog isn't immune to the macro headwinds driving many companies to rein in their cloud spending, but analysts expect its revenue to still grow at a CAGR of 23% from 2023 to 2025 as its GAAP net income grows at a CAGR of 43%.
We should take those estimates with a grain of salt, but Datadog has clearly carved a niche in the growing cloud monitoring market -- which Mordor Intelligence believes will grow at a CAGR of nearly 20% from 2024 to 2029. Its stock might not seem cheap at 16 times this year's sales, but it still has plenty of upside potential.
2. ServiceNow
ServiceNow's cloud-based service helps companies streamline their unstructured work patterns into automated digital workflows. That process makes it easier for companies to expand efficiently, trim their operating expenses, and support remote and hybrid workers.
From 2019 to 2023, ServiceNow's revenue grew at a CAGR of 27%, its operating margin expanded from 21% to 28%, and its net income rose at a CAGR of 29%. Its number of customers with an annual contract value of over $1 million more than doubled from 892 to 1,897, while its annual FCF almost tripled from $971 million to $2.73 billion. Looking ahead, it aims to generate more than $16 billion in revenue in 2026 -- which would represent a three-year CAGR of 21% from 2023.