Apple Inc. (AAPL) still is widely considered a growth company, and rightfully so. AAPL has grown revenues by an average of 19% in each of the past three years, and looking ahead, that won’t stop — for 2015, analysts expect sales to grow more than 27%.
The reason for this increase in growth is both a relatively new presence in China, as well as leasing programs in the U.S. that has consumers upgrading their iPhones annually.
As a result, though, the bar is set high, and 2016 won’t produce nearly as much year-over-year growth, with analysts expecting a rather modest 5.2% increase.
Sure, AAPL remains a top tech firm, but in large part because it’s so cheap, trading at less than 12 times next year’s earnings. Apple has already priced itself accordingly to reflect slowed growth.
No, if you’re looking for serious growth in tech, it’s time to look past Apple and toward a number of other tech stocks.
The following seven companies have been growing sales faster than AAPL over the past few years, and moreover, they’ve got hotter growth prospects for the next couple of years. And to keep things on a relatively even playing field, all of these companies have a market capitalization of at least $10 billion.
Tech Stocks Growing Faster Than AAPL: Alibaba Group Holding Ltd (BABA)
3-Year Annualized Revenue Growth Rate: 56.1%
2015 Expected Revenue Growth: 26.6%
2016 Expected Revenue Growth: 30.1%
Maybe you consider Alibaba (BABA) more of a retail firm than a technology company, but I consider it to be the latter.
Unlike other e-commerce companies, BABA sells marketing and advertising to create revenue, much like many of the world’s largest technology companies. Furthermore, it operates predominantly on the Web, a trait that screams technology in my book.
With that said, BABA is growing and will continue to grow in two ways:
- First, continued growth in gross merchandise sales thanks to expansion around the globe, thereby leading to higher revenue.
- Second, BABA will improve its take rate (number of click-throughs) from 2.33% as it monetizes gross merchandise sales better.
It’s that improvement in BABA’s take rate that will accelerate BABA’s revenue growth in 2016 and beyond.
Tech Stocks Growing Faster Than AAPL: Baidu Inc (ADR) (BIDU)
3-Year Annualized Revenue Growth Rate: 50.1%
2015 Expected Revenue Growth: 36.1%
2016 Expected Revenue Growth: 31.7%
Baidu (BIDU) is often considered the Chinese Google, as it’s the leader of both PC and mobile search in the country. Like Google, Baidu has improved its monetization methods via advertising while also finding explosive growth from the surge of Chinese internet users over the last five years.
Also, Baidu has expanded into other businesses such as online video, online travel, and mobile operating systems. These things will help Baidu keep its growth intact long-term. And while China’s economic growth has slowed, it’s still growing at a healthy pace.
With 30%-plus revenue growth expected in the next two years, Baidu is cruising past Apple. And after losing about a third of its stock value this year, BIDU stock trades at less than 4 times next year’s earnings — profits that are expected to leap 32% after a pullback in the current year.
That makes it potentially one of the best bargain tech stocks around.
Tech Stocks Growing Faster Than AAPL: Ctrip.com International, Ltd. (ADR) (CTRP)
3-Year Annualized Revenue Growth Rate: 28.1%
2015 Expected Revenue Growth: 43.4%
2016 Expected Revenue Growth: 36.8%
Ctrip.com (CTRP) is the most recognized name in China’s online travel market.
While competition in this space is fierce, Ctrip.com has 12-month revenue of just $1.4 billion — far less than top U.S. online travel companies, which suggests that Ctrip has a ton of revenue growth upside long-term because of the market opportunity in China.
Further, that’s why Ctrip.com’s growthy outlook is no surprise.
While CTRP stock is a bit off its 52-week high, 2015 has been a phenomenal year, with Ctrip shares up roughly 60% vs. just 3% gains for the up-and-down Shanghai Composite.
Part of that is because of the explosive growth opportunity that lies ahead.
Tech Stocks Growing Faster Than AAPL: LinkedIn Corp (LNKD)
3-Year Annualized Revenue Growth Rate: 62%
2015 Expected Revenue Growth: 33%
2016 Expected Revenue Growth: 30.5%
LinkedIn (LNKD) is a relatively under-the-radar social media company based in the U.S. — at least compared to Facebook (FB) and Twitter (TWTR) — as it built a niche market around professional services and employment rather than simply hanging out with friends and family.
Albeit, that niche market is huge — LNKD has 380 million users across 200-plus countries, and creates its revenue from a variety of sources like job postings, marketing, ad sales and premium subscriptions.
Combined, these things have LinkedIn growing at a very fast and steady pace.
Tech Stocks Growing Faster Than AAPL: Workday Inc (WDAY)
3-Year Annualized Revenue Growth Rate: 80.3%
2015 Expected Revenue Growth: 46.9%
2016 Expected Revenue Growth: 37.1%
Workday (WDAY) has done all right for itself since its initial public offering in 2012, up 60% since its first day of trading, though it has been flat for well more than a year.
The reason for any optimism in WDAY stems from its leading software-as-a-service platform in the $70 billion human resource management market.
While WDAY is still small right now, with 12-month revenue of just $975 million, its opportunity is large, and it boasts more than 1,000 total customers and strong licensing growth.
Considering the rapid growth expected over the next couple of years, as well as an actual profit supposedly in the cards for Workday’s next fiscal year, there’s a good chance that WDAY can start marching north once more.
Tech Stocks Growing Faster Than AAPL: Salesforce.com, Inc. (CRM)
3-Year Annualized Revenue Growth Rate: 33.4%
2015 Expected Revenue Growth: 23.3%
2016 Expected Revenue Growth: 20.6%
Much like WDAY, Salesforce.com (CRM) operates in the SaaS space, but on a much larger scale with 12-month revenue of nearly $6 billion. CRM has some presence in human resource management, but its core market is customer relationship management.
This is a market that grew 13.3% last year to $23.2 billion, and SaaS applications accounted for roughly half of that. According to IDC, SaaS applications in this market will grow from an $11 billion opportunity last year to $20 billion by 2018. CRM controls the majority of the customer relationship management space that is ran on SaaS applications.
As this growth continues, CRM’s revenue will continue to soar — and there’s a good chance its stock will follow.
Tech Stocks Growing Faster Than AAPL: Twitter (TWTR)
3-Year Annualized Revenue Growth Rate: 136.3%
2015 Expected Revenue Growth: 59.3%
2016 Expected Revenue Growth: 44.4%
Last but not least, Twitter (TWTR) may never reach 400 million monthly active users, but its revenue will continue to grow as new advertising products are created. Specifically, TWTR has thrived in monetizing mobile and in being an early adopter of video.
TWTR’s 12-month revenue of $1.78 billion is not all that impressive, but the company is expected to grow faster than the rest of the tech stocks on this list.
And considering Twitter has been battered by almost 40% during the past six months, now certainly is a “buy the dip” moment in what still could be a very high-growth stock — if new permanent CEO Jack Dorsey can turn the ship around.
Note: All three-year annualized growth rate data was collected from Morningstar, and 2015 and 2016 revenue growth outlooks were collected from Yahoo! Finance.
As of this writing, Brian Nichols was long AAPL and BABA.
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