The holidays are coming, and it’s time to put gifts in the stockings. As you prepare your Santa list, you may want to consider the gifts that keep on giving. Investments can gain significant value over time and generate cash flow if they offer dividends.
Stocks can generate long-term returns and offer more choices during retirement. You can buy stocks for yourself or surprise a friend or family member with extra shares of their favorite companies. Loading up the stockings with these three stocks can be a great move for long-term investors.
Arista Networks (ANET)
Arista Networks (NYSE:ANET) is a cloud networking leader with large data centers. The company’s software helps businesses operate more efficiently while staying safe from hackers.
Arista Networks features high earnings growth and a reasonable 35 P/E ratio. In the third quarter, the firm reported a 28.3% year-over-year (YOY) revenue increase. Net income grew by an even more impressive 54.1% YOY and solidified a 36.1% net profit margin.
In the press release, Arista Networks President and CEO Jayshree Ullal cited continued momentum for the company’s enterprise, cloud, and artificial intelligence sectors.
Further, the company projects Q4 revenue ranging from $1.5 billion to $1.55 billion. The high end of the range represents 20% YOY revenue growth. Also, Arista Networks told investors to expect a 63% non-GAAP gross margin.
Even though non-GAAP gross margin doesn’t indicate the amount of money a company actually keeps, ANET achieved a 63.1% non-GAAP gross margin in Q3. This translates into a 36.1% net profit margin.
Profit margins appear fine, and the company is still expecting double-digit YOY revenue growth. That’s a good combination for any long-term stock.
Supermicro (SMCI)
Companies looking to expand into artificial intelligence (AI) need Supermicro’s (NASDAQ:SMCI) data centers to make their AI solutions work. It takes a lot of computing power and space to enable AI tools and software.
The company’s server and storage solutions are among the best in the industry. Also, Supermicro has a partnership with Nvidia (NASDAQ:NVDA), enabling it to gain further market share.
Supermicro is the lesser-known stock among the two AI plays. However, it has a low 26 P/E ratio relative to its revenue and earnings growth. The company’s year-to-date (YTD) performance has been right in line with Nvidia. SMCI shares have gained 238% YTD.
Finally, the stock has comfortably exceeded Nvidia’s gains over the past five years. SMCI is up an incredible 1,929% during that time frame. In addition, rising demand for edge computing and 5G will benefit the company. It isn’t just an AI play.
ServiceNow (NOW)
Lastly, ServiceNow (NYSE:NOW) has outperformed the market by a wide margin. Shares have gained 70% YTD and are up by 306% over the past five years.
The company has a vast network of 7,700 global enterprise customers, including 1,789 who have annual contract values that exceed $1 million. And, 49 customers have annual contract values above $20 million. That’s a lot of recurring revenue, and the company’s 98% renewal rate suggests most of that revenue repeats.
This solid baseline explains the reason the company exceeded revenue and earnings guidance while raising its guidance for the rest of the year. Revenue grew by 25% YOY while increasing customers with $1 million and $20 million annual contract values.
Additionally, surging net income has contributed to the stock’s gains. The company’s net income more than tripled in the third quarter, resulting in a 10.6% net profit margin. In fact, NOW’s profit margins have been growing in recent quarters.
ServiceNow has a range of products that help businesses increase efficiency, tap into the cloud, and enhance their cybersecurity. The company continues to attract more customers at higher annual contract values. That trend can lead to more gains for long-term investors.
On this date of publication, Marc Guberti held long positions in ANET and SMCI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
