Investors have had a change of heart after selling technology stocks for the better part of eight months. There has been a trend reversal after bellwether tech companies reported earnings for the most recent quarter.
While many thought it would be a time when the bubble for tech earnings would burst, that hasn’t been the case. The results have mainly been stronger than expected despite worries about out-of-control inflation, rising interest rates, a prolonged war in Europe and endless COVID-19–related setbacks that have led to mounting pressure on global supply chains. Sure, some discretionary and consumer tech have seen pullbacks. PC demand has weakened, and ad tech for companies not named Alphabet
has slowed. However, after a large swath of tech names have reported, it is safe to say that tech has been much more resilient than most expected. Beyond the Fantastic 4, there is a wave of high-flyers that I believe have solid long-term outlooks based on secular trends. Here are the five companies:Twilio Twilio’s shares
have cratered 80% from a record high, hurt by slower growth and higher interest rates. However, Twilio has cornered the CPaaS (communications platform as a service) market, and when it comes to customer engagement via messaging, Twilio and its developer ecosystem are the market leader. The company had 41% revenue growth last quarter, outpacing expectations, while net revenue retention — the share of recurring revenue that’s retained from existing customers — remained above 120%. The shift to profitability will be an inflection point for the company, but its revenue growth makes that more when, than if. ServiceNow The Rule of 40 is one of ServiceNow
CEO Bill McDermott’s favorite metrics to call out. (It’s the principle that a software company’s combined growth rate and profit margin should exceed 40%.) And the road to revenue of $16 billion by 2026 is firmly within the company’s grasp despite external factors that have some investors concerned about tech spending. In its recent earnings report, ServiceNow had an overall solid result and continues to benefit from tailwinds for workflow automation and AI that will expand productivity while managing human capital investment. While the stock still trades at a high multiple, it saw a drop of over 40% before a slight retracement on good results and positive guidance. While McDermott’s comments on foreign exchange may have spooked investors, demand for its platform remains robust. It …